Summer Tyme, Inc., is considering a new 5-year expansion project that requires an initial fixed asset investment of $1.674 million. The fixed asset will be depreciated straight-line to zero over its 5-year tax life, after which time it will be worthless. The project is estimated to generate $1,488,000 in annual sales, with costs of $595,200.

Required:

If the tax rate is 35 percent, what is the OCF for this project?

rev: 09_18_2012

Multiple Choice

• $362,700

• $697,500

• $732,375

• $892,800

• $662,625