A glass blowing company would like to start designing and making champagne flutes as its new six-year-long

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Question:

A glass blowing company would like to start designing and making champagne flutes as its new six-year-long project. The company is in the 34 percent income tax rate bracket for its annual taxable income, and it believes this new project will keep it in this tax bracket. The company expects this new business project to be doing well and bring $420,000 in revenues from sales each year. The expenses, such as the money paid to suppliers, cost of electricity, wages paid to employees, etc. are likely to add up to a total of around $290,000 each year. The glass blowing company's required up-front expense would be $520,000, and this money would cover the purchase of fixed assets like the specialized glass blowing equipment and tools. Due to its specialized use, this equipment and the required tools will be losing value according to the five-year MACRS property class: 20.00 percent value lost during the 1st year, 32.00 percent during the 2nd year, followed by 19.20 percent, 11.52 percent, 11.52 percent, and 5.76 percent in years 3-6. Calculate the operating cash flow that this glass blowing company would earn during the 3rd year of this champagne flute project.