Marie's fashions is considering a project that will require $28,000 in net working capital and $87,000 in fixed assets. the project is expected to produce annual sales of $75,000 with associated cash costs of $57,000. the project has a 5-year life. the company uses straight-line depreciation to a zero book value over the life of the project. the tax rate is 30 percent. what is the operating cash flow for this project?

a. - $1,520

b. - $580

c. $420

d. $15,680

e. $17,820

Question

Business

Harmony Tyler

13 February, 02:46

Marie's fashions is considering a project that will require $28,000 in net working capital and $87,000 in fixed assets. the project is expected to produce annual sales of $75,000 with associated cash costs of $57,000. the project has a 5-year life. the company uses straight-line depreciation to a zero book value over the life of the project. the tax rate is 30 percent. what is the operating cash flow for this project?

a. - $1,520

b. - $580

c. $420

d. $15,680

e. $17,820

+1

Answers (1)

Know the Answer?

Lizbeth Eaton · Answer 1

The operating cash flow for this project of Marie’s fashions is letter E. $17,820,

Operating Cash Flow (OCF) measures the amount of cash used by the company in their operating activities.

Solution for the problem:

Operating Cash Flow = ($75,000 - $57,000) (1 - 0.30) + ($87,000/5) (0.30) = $17,820