Problem:
Phone Home, Inc. is considering a new 6-year expansion project that requires an initial fixed asset investment of $5.876 million. The fixed asset will be depreciated straight-line to zero over its 6-year tax life, after which time it will be worthless. The project is estimated to generate $5,328,000 in annual sales, with costs of $2,131,200. The tax rate is 32 percent.
Required:
Question: What is the annual operating cash flow for this project?
- $1,894,318
- $2,211,407
- $2,487,211
- $2,663,021
- $2,848,315
Note: Explain in detail.