Whitestone Products Is Considering a New Project Whose Data Are

question 11

Multiple Choice

Whitestone Products is considering a new project whose data are shown below. The required equipment has a 3-year tax life, and the accelerated 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 operating life. What is the project's Year 4 cash flow?

$\begin{array}{l}\begin{array} { l } \text { Equipment cost (depreciable basis) } \\\text { Sales revenues, each year }\\\text {Operating costs (excl. deprec.) }\\\text { Tax rate}\end{array}\begin{array} { l } \$ 70,000 \\\$ 42,500 \\\$ 25,000 \\35.00\%\end{array}\end{array}$

• A) $11,904
• B) $12,531
• C) $13,190
• D) $13,850
• E) $14,542

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