Rock Haven has a proposed project that will generate sales of 1,840 units annually at a selling price of $31 each.The fixed costs are $13,400 and the variable costs per unit are $7.47.The project requires $32,000 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 $8,500 and the tax rate is 35 percent.What is the operating cash flow for Year 4?

Question

Quizplus · Accepted Answer

The operating cash flow for Year 4 is $22,231.88. This is calculated by taking the sales revenue of $57,040 (1,840 units x $31 per unit) and subtracting the variable costs of $13,708.80 (1,840 units x $7.47 per unit), the fixed costs of $13,400, and the depreciation expense of $8,000 ($32,000 / 4 years). The resulting operating income of $22,231.88 is then multiplied by (1 - tax rate) to arrive at the operating cash flow of $22,231.88.

Rock Haven Has a Proposed Project That Will Generate Sales