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Operating cash flow for JL Ticker's Store

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A proposed expansion project is expected to increase sales of JL Ticker's Store by $35,000 and increase cash expenses by $21,000. The project will cost $24,000 and be depreciated using straight line depreciation to a zero book value over the 4 yr life of the project. The store has a marginal tax rate of 30%. What is the operating cash flow of the project using the tax shield approach?

a. $5,600
b. $7,800
c. $11,600
d. $13,300
e. $14,600

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The solution explains how to calculate the operating cash flow of the project using the tax shield approach.

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