The blue lagoon is considering a project with a five-year life. the project requires $32,000 of fixed assets that are classified as five-year property for macrs. variable costs equal 67 percent of sales, fixed costs are $12,600, and the tax rate is 34 percent. what is the operating cash flow for year 4 given the following sales estimates and macrs depreciation allowance percentages?
year 1 2 3 4 5
sales $ 32,000 $ 34,500 $ 35,600 $ 38,900 $ 42,000
macrs rate 20.00 32.00 19.20 11.52 11.52
multiple choice
−$1,806.67
$640.89
$1,311.16
$1,409.80
−$2,276.60

$1,409.80

Explanation:

Time line                                                            0                1      

Cost of new machine                               -32000    

= Initial Investment outlay                       -32000    

5 years MACR rate                         20.00%     32.00%19.20%11.52%

Sales                                                 32000      345003560038900

ProfitsSales-variable cost                       10560      113851174812837

Fixed cost                                        -12600     -12600-12600-12600

- Depreciation = Cost of machine*MACR%      -6400             -10240-6144-3686.4

=Pretax cash flows                                 -8440      -11455-6996-3449.4

-taxes = (Pretax cash flows)*(1 - tax)               -5570.4      -7560.3-4617.36-2276.604

+ Depreciation                                    6400        1024061443686.4

= after tax operating cash flow           829.60        2679.701526.641409.796

                                                   2                       3                        4

5 years MACR rate          32.00%           19.20%             11.52%

Sales                    34500            35600             38900

Profits  Sales-variable cost     11385             11748             12837

Fixed cost             -12600            -12600            -12600

- Depreciation = Cost of machine*MACR%-10240   -6144   -3686.4

=Pretax cash flows      -11455             -6996             -3449.4

-taxes = (Pretax cash flows)*(1 - tax) -7560.3    -4617.36    -2276.604

+ Depreciation        10240               6144              3686.4

= after tax operating cash flow   2679.70      1526.64      1409.796

Therefore, The operating cash flow for Year 4 given the following sales estimates and MACRS depreciation allowance percentages is $1409.796

answer; work samples;

i'ts proportional. if the inflation rate is 12% for example, the cpi will be 12% less.

hope it ,

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