Operating Cash Flow
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Phone Home, Inc., is considering a new three-year expansion project that requires an intial fixed asset investment of $4.2 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 $3,100,000 in annual sales, with costs of $990,000. If the tax rate is 35%, what is the OCF for this project?
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Solution Summary
The solution explains how to calculate the operating cash flows (OCF) for the project.
Solution Preview
Operating cash flow (OCF) = Net Income + depreciation
Depreciation per year is 4,200,000/3 = 1,400,000
we make the ...
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