Question: 1. 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,
1. 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 $82,400 Operating costs $18,600 Tax rate 25.0% a. $52,388 b. $47,850 c. $63,800 d. $66,000 e. $48,813
2.
As assistant to the CFO of Boulder Inc., you must estimate the Year 1 cash flow for a project with the following data. 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. What is the Year 1 cash flow? Do not round the intermediate calculations and round the final answer to the nearest whole number.
| Sales revenues | $11,300 |
| Operating costs | $4,000 |
| Tax rate | 25.0% |
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