Question
Suppose you want to start a dry cleaning business. You project the following relevant assumptions for this business: It will cost you $150,000 in investment
Suppose you want to start a dry cleaning business. You project the following relevant assumptions for this business: It will cost you $150,000 in investment to purchase the necessary equipment to start this business. The equipment will last 10 years and can be depreciated to zero on a straight-line basis; You expect this business to last 10 years and believe you can generate $100,000 in revenue per year; You expect your costs will be $65,000 per year, not including depreciation; You expect your tax rate to be 40%; At the end of the 10 years you believe the salvage value of your equipment will be $15,000; You believe the appropriate discount rate for this project is 15%.
What is the annual operating cash flow (OCF) from the project?
Group of answer choices
$10,000 < OCF $20,000
$20,000 < OCF $30,000
$30,000 < OCF $40,000
$40,000 < OCF $50,000
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