Question
Clemson Software is considering a new project whose data are shown below.The required equipment has a 3-year tax life, after which it will be worthless,
Clemson Software is considering a new project whose data are shown below.The required equipment has a 3-year tax life, after which it will be worthless, and it will be depreciated by the straight-line method over 3 years.Revenues and other operating costs are expected to be constant over the project's 3-year life.What is the project's Year 1 cash flow? Show work.
Equipment cost (depreciable basis)$80,000
Straight-line depreciation rate33.333%
Sales revenues, each year$70,000
Operating costs (excl. deprec.)$40,000
Tax rate35%
a.$29,916.66 b. $28.666.56c. $27,575.55d. $28,833.24
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