Summer Tyme, Inc., is considering a new 6-year expansion project that requires a

Q: Summer Tyme, Inc., is considering a new 6-year expansion project that requires a

OCF = (3,360,000-1,344,000)*(1-35%) + (3,780,000/6)*35% = $ 1,530,900

ID: 2706676 • Letter: S

Question

Summer Tyme, Inc., is considering a new 6-year expansion project that requires an initial fixed asset investment of $3.780 million. The fixed asset will be depreciated straight-line to zero over its 6-year tax life, after which time it will be worthless. The project is estimated to generate $3,360,000 in annual sales, with costs of $1,344,000. If the tax rate is 35 percent, the OCF for this project is $. (Do not include the dollar sign ($). Round your answer to the nearest whole dollar amount. (e.g., 32))

Explanation / Answer

OCF = (3,360,000-1,344,000)*(1-35%) + (3,780,000/6)*35% = $ 1,530,900

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Summer Tyme, Inc., is considering a new 6-year expansion project that requires a

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