Postman Company is considering two independent projects. One project involves a new product line, and the other involves the acquisition of forklifts for the Materials Handling Department. The projected annual operating revenues and expenses are as follows:

Required:
Compute the after-tax cash flows of each project. The tax rate is 40 percent and includes federal and state assessments.LO1

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Project I (investment in a new product) Revenues $270,000 Cash expenses (135,000) Depreciation (45,000) Income before income taxes $ 90,000 Income taxes (36,000) Net income $ 54,000