QUESTION $11$

Spotted fotato is evaluating project $A,$ which would require the purchase of a piece of equipment for $$550,000.$ During year $1,$ project $A$ is expected to have relevant revenue of $$310,000\mathrm{.}00,$ relevant costs of $$105,000\mathrm{.}00,$ and some depreciation. Spotted Potato would need to borrow $$550,000$ for the equipment and would need to make an interest payment of $$40,000$ to the bank in year $1.$ Relevant net income for project A in year $1$ is expected to be $$96000\mathrm{.}00$ and operating cash flows for project A in year $1$ are expected to be $$166000\mathrm{.}00.$ Straight$-$line depreciation would be used. What is the tax rate expected to be in year $1?$

$7111\%($plus or minus $3$ bps$)$

$28\mathrm{.}89\%($plus or minus $3$ bps$)$

$11\mathrm{.}93\%($plus or minus $3$ bps$)$

$34\mathrm{.}91\%($plus or minus $3$ bps$)$

$$ none of the answers are within $3bps$ of the correct answe