Clemson Software project's Year 1 cash flow
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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?
Equipment cost (depreciable basis) $65,000
Straight-line depreciation rate 33.333%
Sales revenues, each year $60,000
Operating costs (excl. deprec.) $25,000
Tax rate 35.0%
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Solution Summary
The solution computes Clemson Software project's Year 1 cash flow.
Solution Preview
Sales - 60,000
Less
Other operating cost - 25000
Operating Income = 35,000 ...
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