You are considering the purchase of a new piece of equipment…
You are considering the purchase of a new piece of equipment, “Model A”, that costs $600,000, and will be depreciated using four-year straight line depreciation over the course of the four year project. The equipment requires 10,000 in annual maintenance, and will be sold for $80,000 at the end of four years. If your effective tax rate is 20%, what will be the operating cash flow in year 2? Your WACC is 10% on equipment purchases.