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Fool Proof Software is considering a new project whose data are shown below. The equipment that would be used has a 3-year tax life., and
Fool Proof Software is considering a new project whose data are shown below. The equipment that would be used has a 3-year tax life., and the allowed depreciation rates for such property are 33.0%, 45.0%, 15.0%, and 7.0% for Years 1 through 4. Under the new tax law, the equipment used in the project is eligible for 100% bonus depreciation, so it will be fully depreciated at t = 0. Revenues and other operating costs are expected to be constant over the project's 10-year expected life. What is the Year 1 cash flow?
Equipment cost | $55,000 |
Sales revenues, each year | $90,000 |
Operating costs | $25,000 |
Tax rate | 25.0% |
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Step: 2
Step: 3
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