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Operating Cash Flow for Zeta Software

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Zeta 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 operating cash flow for Year 1?
Equipment cost (depreciable basis)
$75,000

Straight-line depreciation rate
33.33%

Sales revenues, each year

$60,000

Operating costs excl. depr'n
$25,000

Tax rate

35.0%

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Solution Summary

Operating Cash Flow is found for Zeta software.

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What is the project's operating cash flow for Year 1=

Sales Revenue = 60000
Less Operating costs = - 25000
Profit Before Depreciation and Taxes = 35000
Less Depreciation = -25000
Profit before Tax = 10000
Less Taxes @35% = -3500
Profit after Tax ...

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