2. 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%, 45%, 15%, and 7% 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 2 cash flow?

Show all of your calculations with appropriate explanation. You won't earn any point without showing allof your calculation work.

Equipment cost (depreciable basis) $65,000

Incremental Sales revenues, each year $60,000

Incremental Operating costs (excl. depreciation) $25,000

Tax rate 35.0%