?. The wed asset il bede ts three year a H Cochran, Inc. s considering a new thr

Question

?. The wed asset il bede ts three year a H Cochran, Inc. s considering a new three-year expansion p e that requires an initial ed asset n es ment of S which time it will be worthless. The project is estimated to generate $2,340,000 in annual sales, with costs of $1,330,000 e ate stra ght-reto zero e e, a r If the tax rate is 30 percent, what is the OCF for this project? (Enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) OCF S

Explanation / Answer

Annual sales = $2340000

Annual Cost = $1330000

Depreciation = $2670000/3 = $890000

EBIT = Annual sales - Annual costs - Depreciation

= $120000

Taxes = 30% of EBIT = $36000

EAT = $120000 - $36000 = $84000

OCF = $84000 + Depreciation

= $974000

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