Marie's Fashions is considering a project that will require $28,000 in net working capital and $87,000 in fixed assets.The project is expected to produce annual sales of $75,000 with associated cash costs of $57,000.The project has a 5-year life.The company uses straight-line depreciation to a zero book value over the life of the project.The tax rate is 30 percent.What is the operating cash flow for this project?
A)-$1,520
B)-$580
C)$420
D)$15,680
E)$17,820

Question

Quizplus · Accepted Answer

OCF = ($75,000 - $57,000)(1 - 0.30) + ($87,000/5)(0.30) = $17,820

Marie's Fashions Is Considering a Project That Will Require $28,000