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 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 Year 1 cash flow?
Equipment cost (depreciable basis)$65,000
Straight-line depreciation rate33.333%
Sales revenues, each year$60,000
Operating costs (excl. deprec.)$25,000
Tax rate25.0%
A. $29,351
B. $30,103
C. $30,875
D. $31,667
E. $32,458
Answer: D
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