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Question 24

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The Book Store is considering a new four-year expansion project that requires an initial fixed asset investment of $2.1 million. The fixed asset will be depreciated straight-line to zero over its five-year life, after which time it will be worthless. The project is estimated to generate $1.98 million in annual sales, with cost of goods sold at $0.79 million. If the tax rate is 34 percent, what is the OCF for this project?

a.

$1,190,000

b.

$963,900

c.

$928,200

d.

$665,000

e.

$325,400