Question
Shade Your Eyes, Inc. makes sunglasses that cost $115 per pair. They want to buy equipment necessary to reduce their costs by $1 per pair.
Shade Your Eyes, Inc. makes sunglasses that cost $115 per pair. They want to buy equipment necessary to reduce their costs by $1 per pair. It will cost $350,000 and will be depreciated on a straight-line basis over the 6-year life of the machine. There is no increase in Net Working Capital for this project. The margin before is $310,900, and with the new machine it will increase to $475,100.
The required return is 15%, and the tax rate is 40%.
You want to determine if you should buy this new equipment.
11) What is the change in Operating Cash Flow (OCF) (6 points)?
round to nearest dollar.
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