Question

ABC, Inc is planning the purchase of new equipment that costs $149,331. The project is expected to last for 14 years. Each year, the new project is expected to sell 103 units for $480 per unit. The variable costs are expected to $50 per unit and the fixed costs are expected to be $23,038. The equipment will be depreciated on a straight-line basis over the 14-year life of the project. That is, the depreciation each year will be $149,331/14. Assuming a tax rate of 23%, what is the operating cash flow?

Answer 1

Year		0	1-14
Cost of equipment		$ -1,49,331
Sale price per unit			$        480
Variable cost per unit			-50
Contribution Margin per unit			430
Total units sold			103
Total Contribution Margin			44,290
Fixed Expenses			-23,038
Depreciation expenses			-10,667
Total fixed Costs			-33,705
Operating Income before Tax			10,586
Tax expenses			-2,435
Net Income			8,151
Depreciation expenses			10,667
Operating Cash flows		-1,49,331	18,817