Question 6 1 pts Razor Inc needs to calculate after tax Operating Cash Flows for

Question

Question 6 1 pts Razor Inc needs to calculate after tax Operating Cash Flows for a new razor it is manufacturing The upfroat machinery cost is $3,000,000 and this cost will be depreciated using straight line depreciation over the project's three-year life. The project will increase sales revenues by S2,000,000 per year. If Razor's tax rate is 35%, what are Razor's after tax for this project over the years 1-3 $1,250,000 per year o $1,500,000 per year $1,650,000 per year o $1,850,000 per year $1,950,000 per year

Explanation / Answer

Option c 1,650,0000 per year  

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Year 0 1 2 3 Machinery Cost 3,000,000 Revenues 2000000 2000000 2000000 Depreciation 1000000 1000000 1000000 Depreciation = Machine Cost/3 EBIT 1000000 1000000 1000000 Revenue -Depreciation Taxes =EBIT * tax rate 350000 350000 350000 EAT=EBIT-Taxes 650000 650000 650000 Depreciation 1000000 1000000 1000000 OCF 1650000 1650000 1650000 OCF=EAT+Depreciation

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