A firm expanded its refining operations which required new petroleum refining equipment to be purchased for $675,000 in August 2015. The equipment was immediately put into service. Sales revenue for the year was $2,225,000. Operating expenses for the year, not including depreciation and capital expenditures, was $1,048,000.

a. If the equipment uses Straight Line depreciation, what is the value of depreciation in year 2015?

b. Assume value of depreciation for year 2015 is $60,000. Calculate net cash flow for year 2015 using an approximate corporate income tax rate of 40%.

c. Given the following cash flows, calculate net present value of the project in year 2015. Assume the firm has a MARR of 12% per year:

2015, $65,000

2016: $120,000

2017: $137,000

2018: $-44,000

Answer rating: 100% (QA)

A Value of depreciation 675000 4 168750 This is calculated based on assumption that m... View the full answer