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The Blue Lagoon is considering a project with a five-year life. The project requires $32,000 of fixed assets that are classified as five-year property for MACRS. Variable costs equal 67 percent of sales, fixed costs are $12,600, and the tax rate is 34 percent. What is the operating cash flow for Year 4 given the following sales estimates and MACRS depreciation allowance percentages

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jepessoa

Answer:

the sales level for year 4 was missing, so I looked for similar questions:

Sales level year 4 = $38,900

macrs depreciation:

period          %               amount

year 4       11.52%          $32,000 x 0.1152 = $3,686.40  

NCF year 4 = {[net sales x (1 - variable costs)] - depreciation - fixed costs} x (1 - tax rate) + depreciation

NCF year 4 = {[$38,900 x (1 - 67%)] - $3,686.40 - $12,600} x (1 - 34%) + $3,686.40 = $1,409.80

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