Jefferson & Sons is evaluating a project that will increase annual sales by $138,000 and annual costs by $94,000. The project will initially require $110,000 in fixed assets that will be depreciated straight-line to a zero book value over the 4-year life of the project. The applicable tax rate is 32 percent. What is the operating cash flow for this project?

Question

Quizplus · Accepted Answer

OCF = ($138,000 - $94,000)(1 - 0.32) + ($110,000/4)(0.32) = $38,720

Jefferson & Sons Is Evaluating a Project That Will Increase