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Winter Tyme, Inc., is considering building a plant to produce snow tires. The project would last 5 years and requires an initial fixed asset investment
Winter Tyme, Inc., is considering building a plant to produce snow tires. The project would last 5 years and requires an initial fixed asset investment of $6.480 million. The fixed asset will be depreciated straight-line to zero over its 5-year tax life, after which time it will be worthless. Winter Tymepaid $75,000 for a market analysis which indicates the project will generate $5,760,000 in annual sales, with costs of $2,304,000.
Required:If the tax rate is 34 percent, what is the OCF for this project?
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