BASIC INFORMATION: a Three-Year Project Will Cost $60,000 to Construct

Multiple Choice

BASIC INFORMATION: A three-year project will cost $60,000 to construct. This will be depreciated straight-line to zero over the three-year life. The price per unit sold is $20 and the variable cost per
Unit sold is $10. Fixed costs are $30,000 per year.
Using the BASIC INFORMATION only, if you expect to sell 7,000 units per year, what is the OCF in
Year 2 assuming a required return of 15% and a tax rate of 30%?

A) $17,000
B) $20,000
C) $34,000
D) $48,000
E) $55,000