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Operating and terminal CFs . If using the 1 5 th edition of the text ( or an earlier edition ) , refer to the

Operating and terminal CFs
.If using the 15th edition of the text (or an earlier edition), refer to the Web Tax Appendix to correctly answer this question. Your company, Pescow Industries, is considering a new project whose data are shown below. The required equipment will be used for 10 years during the projects life. The equipment qualifies for bonus depreciation, so it will be fully depreciated at the time of purchase. It will have zero market value at the end of Year 10, when the project would be terminated. Also, some new net operating working capital would be required to do this project, but it would be recovered at the end of the projects life. Revenues and operating costs are expected to be constant over the projects 10-year expected operating life. What is the projects cash flow in Year 10, including terminal cash flows?
Purchase price of equipment$80,000
Required new NOWC15,000
Annual sales revenues42,500
Operating costs25,000
Tax rate25%
a.$ 4,375
b.$13,125
c.$15,000
d.$17,500
e.$28,125

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