Answered

3. A proposed expansion project is expected to increase sales of JL Ticker's Store by $35,000 and increase cash expenses by $21,000. The project will cost $24,000 and be depreciated using straight-line depreciation to a zero book value over the 4-year life of the project. The store has a marginal tax rate of 30 percent. What is the operating cash flow of the project using the tax shield approach?

Answer :

Answer:

The operating cash flow is $11,600

Explanation:

In this question, we are tasked with calculating the operating cash flow of a project using the tax shield approach.

To get this, it is through a mathematical formula. That is we are to use mathematical expression to solve the problem.

Mathematically,

Operating Cash flow = {35000-21000*(1-.30)}+{(24000/4)*0.30}

= 9800+1800

= $11600

Other Questions