Question

The project is estimated to generate $1.735 million in annual sales, with costs of $650,000. If the tax rate is 21 percent, what is the OCF for this project?

Answer 1

$ 1,019,550

Step-by-step explanation:

OCF = (sales - costs) * (1 - TC) + TC *(Depreciation)

sales = $ 1,735,000

costs = $ 650,000

tc= 21% = 0.21

So:

OCF = ( 1,735,000 - 650,000) * (1-0.21) + 0.21 * ($2,320,000/3)

OCF = $ 1,019,550