Your company, CSUS Inc., is considering a new project whose data are shown below

Question

Your company, CSUS Inc., 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%, 45%, 15%, and 7% 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? Equipment cost (depreciable basis) Sales revenues, each year Operating costs (excl. depr.) Tax rate $70,000 $33,500 $25,000 35.0%

Explanation / Answer

Sales $ 33,500 Less: Costs $ 25,000 Depreciation $    4,900 70000*7% NOPAT $    3,600 Less: Tax @ 35% $    1,260 Add: Depreciation $    4,900 Year 4 cash flows $    6,160

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