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