Fitzgerald Computers is considering a new project whose data are shown below. The required equipment has a 3-year tax life, after which it will have zero book value, 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 project’s 4-year life. What is the project’s Year 4 cash flow?
Equipment cost (depreciable basis)
$65,000
Straight-line depreciation rate
33.33%
Sales revenues, each year
$60,000
Operating costs (excl. deprec.)
$25,000
Tax rate
35.0%
a.
$30,333
b.
$28,438
c.
$22,750
d.
$27,500
e.
$21,000
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