The Blue Lagoon is considering a project with a five-year life. The project requ

Question

The Blue Lagoon is considering a project with a five-year life. The project requires $110,000 of fixed assets that are classified as five-year property for MACRS. Variable costs equal 71 percent of sales, fixed costs are $9,600, and the tax rate is 35 percent. What is the operating cash flow for year 4 given the following sales estimates and MACRS depreciation allowance percentages? Year 1 2 3 4 5 sales 28,000 34000 39000 22000 7000 MACRS 20.00 32.00 19.20 11.52 11.52 A. -$1,806 B. $640 C. $1,809 D. $2,342 E. $2,811

Explanation / Answer

on solving the above question the operating cash flow for year 4 given the following sales estimates and MACRS depreciation allowance percentages comes out to be equal to $2,342 hence Option D ie $2,342

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