Question: King Nothing is evaluating a new 6-year project that will have annual sales of $470,000 and costs of $320,000. The project will require fixed assets

King Nothing is evaluating a new 6-year project that will have annual sales of $470,000 and costs of $320,000. The project will require fixed assets of $570,000, which will be depreciated on a 5-year MACRS schedule. The annual depreciation percentages are 20.00 percent, 32.00 percent, 19.20 percent, 11.52 percent, 11.52 percent, and 5.76 percent, respectively. The company has a tax rate of 35 percent. What is the operating cash flow for Year 3?

The Lumber Yard is considering adding a new product line that is expected to increase annual sales by $397,000 and expenses by $280,000. The project will require $189,000 in fixed assets that will be depreciated using the straight-line method to a zero book value over the 7-year life of the project. The company has a marginal tax rate of 35 percent. What is the depreciation tax shield?

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