A proposed expansion project is expected to increase sales by $89,000 and increase cash expenses by $44,000. The project will require $60,000 of fixed assets that will be depreciated using straight-line depreciation to a zero book value over the five-year life of the project. The store has a marginal tax rate of 30 percent. What is the operating cash flow of the project using the tax shield approach? Ignore bonus depreciation.

A proposed expansion project is expected to increase sales by $89,000 and increase cash expenses by $44,000. The project will require $60,000 of fixed assets that will be depreciated using straight-line depreciation to a zero book value over the five-year life of the project. The store has a marginal tax rate of 30 percent. What is the operating cash flow of the project using the tax shield approach? Ignore bonus depreciation.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 13P

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