ABC Company is considering a new project and has just purchased equipment that has a five-year life. The equipment costs $20 million and will be sold for 25% of its original cost in year 4. Use the MACRS depreciation schedule to compute the amount of depreciation and the book value for each year. If the tax rate is 21%, what is the after-tax salvage value in year 4.

Now consider the project that ABC company is considering in previous problem, is expected to have sales of 1 million units per year for the four-year life of the project. They expect to sell each unit at a price of $80. Cost of goods sold are expected to be 75% of sales revenue and sales and general administrative expenses are expected to be 12.5% of sales revenue. The company will also have interest expense of $1.5 million per year. Construct a proforma income statement to compute the net income and operating cash flows for ABC Company's project.