Answer to Question #19496 in Finance for brandon

Question

The Blue Lagoon is considering a project with a five-year life. The project requires $110,000 of fixed assets that are classified as five-year property for MACRS. Variable costs equal 71 percent of sales, fixed costs are $9,600, and the tax rate is 35 percent. What is the operating cash flow for year 4 given the following sales estimates and MACRS depreciation allowance percentages?

Year 1 2 3 4 5
sales 28,000 34000 39000 22000 7000
MACRS 20.00 32.00 19.20 11.52 11.52


A. -$1,806
B. $640
C. $1,809
D. $2,342
E. $2,811