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    Calculation Operating Cash Flows (OCF) for a project

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    9-9. Calculating Project OCF. Keene, Inc., is considering a new three-year expansion
    project that requires an initial fixed asset investment of $1.8 million. The fixed asset
    will be depreciated straight-line to zero over its three-year tax life, after which time it will be worthless. The project is estimated to generate $1,920,000 in annual sales,
    with costs of $985,000. If the tax rate is 35 percent, what is the OCF for this project?

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    Solution Preview

    The operating cash flows are as below:

    Year 0 Year 1 Year 2 Year 3
    Initial Investment -1.8
    Sales 1.920 ...

    Solution Summary

    The solution explains how to calculate the operating cash flows for a project