Clemson Software Is Considering a New Project Whose Data Are

question 3

Short Answer

Clemson Software 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? $\begin{array} { l r } \text { Equipment cost (depreciable basis) } & \$ 65,000 \\ \text { Straight-line depreciation rate } & 33.333 \% \\ \text { Sales revenues, each year } & \$ 60,000 \\ \text { Operating costs (excl. depreciation) } & \$ 25,000 \\ \text { Tax rate } & 35.0 \% \end{array}$
a. $\$ 28,115$
b. $\$ 28,836$
c. $\$ 29,575$
d. $\$ 30,333$
e. $\$ 31,092$

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Definitions:

ECT

Electroconvulsive Therapy, a medical treatment most commonly used for severe depression that involves electrically induced seizures under general anesthesia.

Drug Therapies

The treatment of disease and prevention of symptoms using medications.

Depression

A psychological disorder featuring a constant state of depression or a diminished interest in activities, leading to substantial difficulties in daily operations.

Suicide Risk

The likelihood that an individual will attempt to take their own life, often assessed in clinical settings to prevent self-harm.