Blue Ocean Co

Multiple Choice

Blue Ocean Co.will purchase a machine that will cost $2,575,000.Required modifications will cost $375,000.Blue Ocean will need to invest $75,000 for additional inventory.The machine has an IRS approved useful life of seven years; it is presumed to have no salvage value.Blue Ocean plans to depreciate the machine by using the straight-line method.The machine is expected to increase Blue Ocean's sales revenues by $1,890,000 per year; operating costs excluding depreciation are estimated at $454,600 per year.Assume that the firm's tax rate is 40%.What is the annual operating cash flow?

A) $922 464
B) $1,126,287
C) $813,563
D) $1,029,811