Question
The equipment that would be used 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 project's 3-year life. What is the project's operating cash flow during Year 1?
Equipment cost (depreciable basis) $75,000
Straight line depreciation rate 33.33%
Sales $60,000
Operating costs excl. depr’n $25,000
Tax rate 35%
Equipment cost (depreciable basis) $75,000
Straight line depreciation rate 33.33%
Sales $60,000
Operating costs excl. depr’n $25,000
Tax rate 35%