line to zero over its three-year tax life, a her H Cochran, Inc. is considering

Question

line to zero over its three-year tax life, a her H Cochran, Inc. is considering new tro-year expansion propect that reqres n ntial txed inset mest ent of $2 460,000. The fixed asset wil be depreciated straig which time be wonness. The prgect is estimated to generate $2,270,000 in annual sales, wn costs of S 1,260,000. 9, 1,234,567. Do not round intervnedlete caleutationa and round your answer to the lf the tnx rate is 35 percent. what the F foy PiS proyect? (Emer your answer un dolars, not misons o' doters, nearest whole number,g. 32) OCF

Explanation / Answer

Depreciation Per Year = Total Investment /Life

= $ 2,460,000 / 3 Years

= $ 820,000

OCF = Earnings Before Interest and Taxes + Depreciation Expense - Taxes

= $ 943,500

Hence the correct answer is $ 943,500

Note:

Particulars Amount($) Sales 2,270,000 Less:costs 1,260,000 Less:depreciation 820,000 EBIT 190,000 Less:interest expense -    EBT 190,000 Less:taxes@35% 66,500 Net income 123,500 OCF 943,500

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