Answer:
D. $347,540
Explanation:
The operating cash flow is shown below:
= EBIT + Depreciation - Income tax expense
where,
EBIT = (Sales price per unit - variable cost per unit) × number of units in year 2 - fixed cost
= ($240 - $90) × 4,400 units - $170,000
= $490,000
Income tax expense = (Sales price per unit - variable cost per unit) × number of units in year 2 - fixed cost × tax rate
= ($240 - $90) × 4,400 units - $170,000 × 0.34
= $166,600
And, the depreciation expense would be
= Depreciation expense × tax rate
= $71,000 × 0.34
= $24,140
The depreciation expense would be
= (Initial investment - salvage value) ÷ (useful life)
= ($213,000 - $0) ÷ (3 years)
= ($213,000) ÷ (3 years)
= $71,000
Now apply these values to the formula above.
Thus, the value would be
= $490,000 + $24,140 - $166,600
= $347,540
