Question
Taylor United is considering overhauling its equipment to meet increased demand for its product. The cost of equipment overhaul is $4.13 million, plus $222,261.00 in
Taylor United is considering overhauling its equipment to meet increased demand for its product. The cost of equipment overhaul is $4.13 million, plus $222,261.00 in installation costs. The firm will straight-line depreciate the equipment to zero using a 5-year recovery period. Additional sales from the overhaul should amount to $239,051.00 per year, and additional operating expenses and other costs (excluding depreciation) will amount to 35.00% of the additional sales. The firm has an ordinary tax rate of 39.00%. What is the operating cash flow for year 1 of this project?
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