To determine the operating cash flow for year 4 that Pink Ocean Construction should use in its NPV analysis of Project X, we need to follow these steps:

1. Calculate Depreciation Expense:

   • The equipment cost is $269,000 and it will be depreciated to $125,000 over 8 years.
   • Annual depreciation expense = $\frac{269,000 - 125,000}{8}$

   $\text{Annual depreciation expense} = \frac{144,000}{8} = 18,000$

2. Calculate Incremental Revenues and Costs in Year 4:

   • Charlotte Office Revenue: $174,000
   • Charlotte Office Costs: $126,000
   • Buffalo Office Revenue Increase: $37,000
   • Buffalo Office Cost Increase: $29,000

   Therefore, the total revenue increase in year 4 is: $174,000 + 37,000 = 211,000$

   And the total cost increase in year 4 is: $126,000 + 29,000 = 155,000$

3. Calculate Operating Income Before Taxes:

   • Operating Income = Total Revenues - Total Costs - Depreciation

   $\text{Operating Income} = 211,000 - 155,000 - 18,000 = 38,000$

4. Calculate Taxes on Operating Income:

   • Tax Rate = 28%
   • Taxes = Operating Income × Tax Rate

   $\text{Taxes} = 38,000 \times 0.28 = 10,640$

5. Calculate Net Operating Income After Taxes: $\text{Net Operating Income After Taxes} = 38,000 - 10,640 = 27,360$

6. Add Back Depreciation (Non-Cash Expense):

   • Operating Cash Flow = Net Operating Income After Taxes + Depreciation

   $\text{Operating Cash Flow} = 27,360 + 18,000 = 45,360$

Final Answer:

The operating cash flow for year 4 is $45,360.

Would you like additional details on any specific part of this solution?

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Here are five related questions to further explore this topic:

1. How would changes in the tax rate affect the operating cash flow calculation?
2. What impact would a change in depreciation method have on cash flows?
3. How would an increase in the initial investment affect the NPV of Project X?
4. How do incremental revenues and costs from other offices affect project feasibility?
5. What other financial metrics could be useful for assessing Project X's viability?

Tip: Always include non-cash expenses like depreciation in cash flow calculations, as they impact taxes but not cash flow directly.