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5) Consider Project X which leads to an increase in annual sales by $50,000 and costs by $30000. The initial asset cost amoun
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Answer #1
Calculation of annual operating cash flow is shown below
Annual depreciation 150000/10
Annual depreciation $15,000
Sales revenue $50,000
Less: Costs $30,000
Less: Depreciation $15,000
Income before taxes $5,000
Less: Taxes @ 25% $1,250
Net income $3,750
Add: Depreciation $15,000
Annual operating cash flow $18,750
Thus, annual operating cash flow for this project is $18,750
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