Question
Your new employer, Freeman Software, is considering a new project whose data are shown below. The equipment that would be used has a 3-year tax
Your new employer, Freeman 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 33.33%, 44.45%, 14.81%, and 7.41% for Years 1 through 4. 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 (depreciable basis) | $65,000 |
Sales revenues, each year | $60,000 |
Operating costs (excl. deprec.) | $25,000 |
Tax rate | 25.0% |
a. $36,869
b. $33,442
c. $31,666
d. $31,849
e. $35,114Step by Step Solution
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Fundamentals of Financial Management
Authors: Eugene F. Brigham, Joel F. Houston
Concise 6th Edition
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