Question: ABC Company is considering a new project whose data are shown below. The required equipment has a 3-year tax life, after which it will be

ABC Company is considering a new project whose data are shown below. The required equipment has a 3-year tax life, after which it will be worthless, and it will be depreciated by the straight-line method over 3 years. Revenues and other operating costs are expected to be constant over the projects 3-year life.

What is the projects Year 1 cash flow?

Equipment cost (depreciable basis) $60,000

Sales revenues, each year $66,000

Operating costs (excl. deprec.) $28,000

Tax rate 40.0%

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