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Hubrey Home Inc. is considering a new three-year expansion project that requires an initial fixed asset...

Hubrey Home Inc. is considering a new three-year expansion project that requires an initial fixed asset investment of $3.6 million. The fixed asset falls into Class 10 for tax purposes (CCA rate of 30% per year), and at the end of the three years can be sold for a salvage value equal to its UCC. The project is estimated to generate $2,620,000 in annual sales, with costs of $829,000. If the tax rate is 35%, what is the OCF for each year of this project?

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Answer #1

Use spreadsheet for the ease in computations. Enter values and formulas in the spreadsheet as shown in the image below.

Dxc90LjuLJNqAAAAAElFTkSuQmCC

The obtained result is provided below.

z+FVetKEhv5LQAAAABJRU5ErkJggg==

3 3
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