Summer Tyme, Inc., is considering a new 3-year expansion project that requires an initial fixed asset investment of $2,422,431. The fixed asset will be depreciated straight-line to zero over its 3-year tax life, after which time it will be worthless. The project is estimated to generate $1,950,026 in annual sales, with costs of $1,675,501. If the tax rate is 0.36 , what is the OCF for this project?

Due to its direct connection to the company's core business activities, such as sales, distribution, production, and so forth, operating activities account for the majority of the company's cash flows. These activities also determine the profitability of the company, and items falling under this heading are the main types of cash flows.

Given,

Fixed Asset = $2,422.31

Sales = $1,950,026

Cost = $1,675,501

Tax-rate = 0.36

Required to Calculate Operating Cash Flow(OCF) = (Sale - Cost - Deprecaition) x (1-tax) + Deprecaition

OCF = ($1,950,026 - $1,675,501 - $2,422,431/3) x (1 - 0.36) + $807,477

OCF = $466,387.72

Thus, All of the money that is made by a company's primary business operations is considered operating cash flow. All capital asset acquisitions and investments in other business endeavors are included in investing cash flow. The company's payments as well as all proceeds from the issuance of debt and stock are included in the financing cash flow. The Operating Cash Flow(OCF) is $466,387.72 for this project.

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