5.

Jack 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. Net working capital required is $5,000. What is the Year 3 cash flow?

Equipment cost (depreciable basis) $95,000

Sales revenues, each year $65,000

Operating costs (excl. deprec.) $30,000

Tax rate 35%

Question 5 options:

$29,554

$27,735.50

$25,878

None of the above.

6.

Acne Corp. is now at the end of the final year of a project. The equipment originally cost $25,500, of which 75% has been depreciated. The firm can sell the used equipment today for $6,100, and its tax rate is 40%. What is the equipments after-tax salvage value for use in a capital budgeting analysis? Note that if the equipment's final market value is less than its book value, the firm will receive a tax credit as a result of the sale.

Question 6 options:

	$6,100
	$5,990
	$5,825
	$6,375