Proof Software Is Considering a New Project Whose Data Are

question 4

Multiple Choice

Proof 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%, 45%, 15%, and 7% 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. depreciation) $25,000
Tax rate35.0%

• A)$30,258
• B)$31,770
• C)$33,359
• D)$35,027
• E)$36,778

---

Definitions:

Equilibrium Price

The price at which the quantity of a good or service demanded by buyers equals the quantity supplied by sellers.

Rationing Mechanism

A system designed to allocate goods or services among interested users, often used when demand exceeds supply.

Discrimination

The unjust or prejudicial treatment of different categories of people or things, especially on the grounds of race, age, or sex.

Rent Control

Government policies that limit the amount landlords can charge for renting out their property.