Posted: February 8th, 2016

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,

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 [Excluding Depreciation]: $25,000
Tax Rate: 35.0%

A. $29,196
B. $29,945
C. $30,712
D. $31,500
E. $32,287