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OCF: Calculate operating cash flow using MACRS depreciation

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Consider the following project.
Project X has a five-year life. The Project X requires $90,000 of fixed assets that are classified as five-year property for MACRS. Variable costs equal 64 percent of sales. Fixed costs are $13,500 and the tax rate is 34 percent.

Year Sales MACRS
1 $28000 20
2 $34000 32
3 $39000 19.2
4 $22000 11.52
5 $7000 11.52

What is the operating cash flow for year 3 given the following sales amounts and MACRS depreciation allowance percentages?

1. 5825.80
2. 6231.60
3. 6714.21
4. 7301.19
5. 6427.09

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Solution Summary

Shows the calculations in step-by-step manner for easy understanding

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For Third Year
Sales =39000
Variable Cost = 64%*39000= 24960
Depreciation = ...

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