Question
GlivCo is evaluating project A, which would require the purchase of a piece of equipment for $170,000. During year 1, project A is expected to
GlivCo is evaluating project A, which would require the purchase of a piece of equipment for $170,000. During year 1, project A is expected to have relevant revenue of $109,000, relevant costs of $53,000, and some depreciation. GlivCo would need to borrow $170,000 for the equipment and would need to make an interest payment of $10,000 to the bank in year 1. Relevant net income for project A in year 1 is expected to be $19,000 and operating cash flows for project A in year 1 are expected to be $41,000. Straight-line depreciation would be used. What is the tax rate expected to be in year 1? Answer as a rate in decimal form, rounded to 4 decimal places (for example, .1234 or .0987).
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