15.

California Hideaways is considering a new project whose data are shown below. The equipment that would be used has a 5-year tax life, would be depreciated by the straight-line method over its 5-year life, and would have zero salvage value. In addition, this project requires an investment in new operating working capital of $5,000 (recoverable at the end of the project). Revenues and costs are expected to be constant over the project's 5-year life.

Fixed Asset cost (depreciable basis): $50,000

Straight-line depreciation rate: 20.00%

Sales revenues, each year: $60,000

Costs excl. depreciation, each year: $35,000

Tax rate: 40%

r = WACC: 10.0%

What is the cash flows from operations for year 3?

Select one:

a. $13,000

b. $19,000

c. $25,000

d. $31,000

e. None of the above