Question

You work for Whittenerg Inc., which is considering a new project whose data are shown below. What is the project's Year 1 cash flow?Sales revenues, each year $62,500Depreciation $8,000Other operating costs $25,000Interest expense $8,000Tax rate 35.0%a. $25,816b. $27,175c. $28,534d. $29,960e. $31,458

Answer 1

Answer:

b. $27,175

Explanation:

The computation of the year 1 cash flow is shown below:

= Sales revenue - other operating cost - depreciation expenses - income tax expense + depreciation expenses

where,  

Income tax expense = (Sales revenue - other operating cost - depreciation expenses) × income tax rate  

= ($62,500 - $25,000 - $8,000) × 35%

= $10,325

And, the other items values would remain the same

Now put these values to the above formula  

So, the value would equal to

= $62,500 - $25,000 - $8,000 - $10,325 + $8,000

= $27,175