Fitzgerald Computers Is Considering a New Project Whose Data Are

question 45

Multiple Choice

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? $\begin{array}{lc}\text { Equipment cost (depreciable basis) } & \$ 65,000 \\\text { Straight-line depreciation rate } & 33.333 \% \\\text { Sales revenues, each year } & \$ 60,000 \\\text { Operating costs (excl. deprec.) } & \$ 25,000 \\\text { Tax rate } & 35,0 \%\end{array}$

• A) $28,115
• B) $28,836
• C) $29,575
• D) $30,333
• E) $31,092

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