Winter Tyme, Inc., is considering building a plant to produce snow tires. The project would last 5 years and requires an initial fixed asset investment of $1.134 million. The Fixed asset will be depreciated straight-line to zero over its 5-year tax life, after which time it will be worthless. Winter Tyme paid $75,000 for a market analysis which indicates the project will generate $1,008,000 in annual sales, with costs of $403,200. Required: If the tax rate is 34 percent, what is the OCF for this project?
Winter Tyme, Inc., is considering building a plant to produce snow tires. The project would last 5 years and requires an initial fixed asset investment of $1.134 million. The Fixed asset will be depreciated straight-line to zero over its 5-year tax life, after which time it will be worthless. Winter Tyme paid $75,000 for a market analysis which indicates the project will generate $1,008,000 in annual sales, with costs of $403,200. Required: If the tax rate is 34 percent, what is the OCF for this project?
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 4P
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Question
6
![Winter Tyme, Inc., is considering building a plant to produce snow tires. The project
would last 5 years and requires an initial fixed asset investment of $1.134 million. The
fixed asset will be depreciated straight-line to zero over its 5-year tax life, after which
time it will be worthless. Winter Tyme paid $75,000 for a market analysis which indicates
the project will generate $1,008,000 in annual sales, with costs of $403,200.
Required:
If the tax rate is 34 percent, what is the OCF for this project?
Multiple Choice
4
O
O
$500,094
$476,280
$249,480
$604,800
$452,466](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ff5d112bf-c62b-4ca7-8d6d-ddeedfdc3f1b%2F448040ab-be81-447a-ba31-40f2f70d49f0%2F0mbrxg_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Winter Tyme, Inc., is considering building a plant to produce snow tires. The project
would last 5 years and requires an initial fixed asset investment of $1.134 million. The
fixed asset will be depreciated straight-line to zero over its 5-year tax life, after which
time it will be worthless. Winter Tyme paid $75,000 for a market analysis which indicates
the project will generate $1,008,000 in annual sales, with costs of $403,200.
Required:
If the tax rate is 34 percent, what is the OCF for this project?
Multiple Choice
4
O
O
$500,094
$476,280
$249,480
$604,800
$452,466
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