Question

Miller's, Inc. is considering a new 4-year expansion project that requires an initial fixed asset investment of $3.6 million. The fixed asset will be depreciated straight-line to zero over its 4-year life, after which time it will be worthless. The project is estimated to generate $3.9 million in annual sales, with costs of $2.6 million. If the tax rate is 34 percent, what is the OCF for this project?
$1,164,000
$997,720
$684,280
$858,000
$911,760

Answer 1

Miller's, Inc. is considering a new 4-year expansion project that requires an initial fixed asset investment of $3.6 million. The fixed asset will be depreciated straight-line to zero over its 4-year life, after which time it will be worthless. The project is estimated to generate $3.9 million in annual sales, with costs of $2.6 million. If the tax rate is 34 percent, what is the OCF for this project?

$1,164,000

$997,720

$684,280

**$858,000**

$911,760