The equipment has an expected life of six years

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Reference no: EM131464328

What is the expected operating cash flow for year 2 of a project given the following information. To undertake the project, $332,000 must be spent on new equipment. The equipment has an expected life of 6 years and will be depreciated straight-line over that same period to a book value of 0. New annual sales of $201,000 are expected (expected sales are the same each year). Cost of goods sold are projected to be 46% of sales. Tax rate is 31%. In the event EBIT is negative, the firm would have a tax credit based on the 31% tax rate. Fixed cash operating expenses are $50,000 per year. Interest expense is expected to be $22,000 each year. Salvage value of the equipment at the end of its life is expected to $66,000. (Round your answer to the nearest penny and enter with a decimal point (a period).)

Reference no: EM131464328

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