Your company, Q4 Inc., is considering a new project whose data are shown below. The required equipment has an economic year of 5 years, and has a CCA rate of 30% in class 10. Revenues and cash operating costs are expected to be constant over the project's 5-year operating life. What is the project's net operating cash flow during Year 2? Equipment cost$70,000
Sales revenues (each year)$50,000
Cash operating costs (each year)$25,000
Tax rate35.0%
A) $16,213.00
B) $20,067.50
C) $22,497.50
D) $18,863.50

Question

Quizplus · Accepted Answer

The net operating cash flow is calculated as: (Sales - Operating Costs) * (1 - Tax Rate) + (Depreciation * Tax Rate). Depreciation for Year 2 is calculated using the CCA rate on the declining balance.

Your Company, Q4 Inc