Shay Hand Outfitters has a proposed project that will generate sales of 3,100 units annually at a selling price of $37.00 each.The fixed costs are $25,000 and the variable costs per unit are $11.95.The project requires $72,000 of fixed assets that will be depreciated on a straight-line basis to a zero book value over the four-year life of the project.The salvage value of the fixed assets is $9,700 and the tax rate is 21 percent.What is the operating cash flow for Year 4?

Question

Quizplus · Accepted Answer

The operating cash flow for Year 4 is $45,377.45. This is calculated as follows:Sales revenue = 3,100 units * $37.00 per unit = $114,700Variable costs = 3,100 units * $11.95 per unit = $37,045Depreciation expense = $72,000 / 4 years = $18,000Taxable income = $114,700 - $37,045 - $18,000 = $59,655Taxes (21%) = $59,655 * 0.21 = $12,534.55Operating cash flow = $114,700 - $37,045 - $18,000 - $12,534.55 + $9,700 = $45,377.45

Shay Hand Outfitters Has a Proposed Project That Will Generate