A proposed expansion project is expected to increase sales by $74,300 and increase cash expenses by $46,900. The project will require $52,800 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 23 percent. What is the operating cash flow of the project using the tax shield approach?
A proposed expansion project is expected to increase sales by $74,300 and increase cash expenses by $46,900. The project will require $52,800 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 23 percent. What is the operating cash flow of the project using the tax shield approach?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Transcribed Image Text:A proposed expansion project is expected to increase sales by $74,300
and increase cash expenses by $46,900. The project will require $52,800
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 23 percent. What is the operating cash flow of the
project using the tax shield approach?
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