Question
XYZ operates indoor tracks. The firm is evaluating the Santa Fe project, which would involve opening a new indoor track in Santa Fe. During year
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XYZ operates indoor tracks. The firm is evaluating the Santa Fe project, which would involve opening a new indoor track in Santa Fe. During year 1, XYZ would have total revenue of $171,000 and total costs of $75,100 if it pursues the Santa Fe project, and the firm would have total revenue of $155,000 and total costs of $73,500 if it does not pursue the Santa Fe project. Depreciation taken by the firm would be $75,900 if the firm pursues the project and $37,200 if the firm does not pursue the project. The tax rate is 46.30%. What is the relevant operating cash flow (OCF) for year 1 of the Santa Fe project that XYZ should use in its NPV analysis of the Santa Fe project?
$40,300.00 (plus or minus $1)
$14,649.10 (plus or minus $1)
$25,650.90 (plus or minus $1)
$29,049.10 (plus or minus $1)
None of the above is within $1 of the correct answer
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