**Project Cash Flow Analysis for Fool Proof Software****Introduction**: Fool Proof Software is evaluating a new project. Below are the financial details and calculations necessary to determine the Year 1 cash flow for the project.**Project Details**:- **Equipment Cost**: $55,000- **Sales Revenues, Per Year**: $82,300- **Operating Costs**: $20,700- **Tax Rate**: 25.0%**Depreciation Details**:The equipment will be fully depreciated at t = 0 under the new tax law, which allows for 100% bonus depreciation. The given depreciation rates for similar property, though not applicable in this scenario, are as follows:- Year 1: 33.0%- Year 2: 45.0%- Year 3: 15.0%- Year 4: 7.0%**Objective**:To find the Year 1 cash flow for the project.**Options Given**:a. $46,200 b. $47,163 c. $61,600 d. $64,350 e. $50,738 **Calculation**:1. **Revenue and Costs**: - Revenues: $82,300 - Operating Costs: $20,7002. **Depreciation**: Since the equipment is fully depreciated at t = 0, the depreciation expense for Year 1 is $55,000.3. **Taxable Income**: \[ \text{Taxable Income} = \text{Revenues} - \text{Operating Costs} - \text{Depreciation} \] \[ \text{Taxable Income} = 82,300 - 20,700 - 55,000 = 6,600 \]4. **Tax**: \[ \text{Tax} = \text{Taxable Income} \times \text{Tax Rate} \] \[ \text{Tax} = 6,600 \times 0.25 = 1,650 \]5. **Net Income**: \[ \text{Net Income} = \text{Taxable Income} - \text{Tax} \] \[ \text{Net Income}

Sales revenue=$82,300operating costs=$20,700Tax rate=25%Required:Year-1 Cash flow=?

ool Proof Software is considering a new project whose data are shown below. The equipment that would be used has a 3-year tax life, and the allowed depreciation rates for such property are 33.0 %, 45.0%, 15.0 %, and 7.0% for Years 1 through 4. Under the new tax law, t quipment used in the project is eligible for 100% bonus depreciation, so it will be fully depreciated at t = o. Revenues and other operating costs are expected to be constant over the project's 10-year expected life. What is the Year 1 cash flow? Equipment cost Gales revenues, each year Operating costs ax rate Oa. $46,200 Ob. $47,163 c. $61,600 Od. $64,350 e. $50,738 $55,000 $82,300 $20,700 25.0%

ool Proof Software is considering a new project whose data are shown below. The equipment that would be used has a 3-year tax life, and the allowed depreciation rates for such property are 33.0 %, 45.0%, 15.0 %, and 7.0% for Years 1 through 4. Under the new tax law, t quipment used in the project is eligible for 100% bonus depreciation, so it will be fully depreciated at t = o. Revenues and other operating costs are expected to be constant over the project's 10-year expected life. What is the Year 1 cash flow? Equipment cost Gales revenues, each year Operating costs ax rate Oa. $46,200 Ob. $47,163 c. $61,600 Od. $64,350 e. $50,738 $55,000 $82,300 $20,700 25.0%

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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