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What is the operating cash flow of project using tax shield

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Problem 1: A project will increase the sales of Karan's Garage by $40,000 and increase cash expenses by $36,000. The project's fixed assets will cost $30,000 and be depreciated using straight-line depreciation to a zero book value over the 3-year life of the project. The company has a marginal tax rate of 32%. What is the operating cash flow of the project using the tax shield approach?

Option 1: $5,920

Option 2: $17,500

Option 3: $8,400

Option 4: $9,100

Option 5: $15,600

Reference no: EM132946091

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