Your new employer, Freeman Software, is considering a new project whose data are shown below. The equipment that would be used has a 3-year tax life, and the allowed depreciation rates for such property are 33.33%, 44.45%, 14.81%, and 7.41% for Years 1 through 4. Revenues and other operating costs are expected to be constant over the project's 10-year expected life. What is the Year 1 cash flow?
Equipment cost (depreciable basis)$65,000
Sales revenues, each year$60,000
Operating costs (excl. deprec.)$25,000
Tax rate25.0%
A. $31,666
B. $31,849
C. $33,442
D. $35,114
E. $36,869
Answer: A
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