# Corporate Finance

19. Fool 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 MACRS 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 life. What is the operating cash flow for Year 1?

Equipment cost (depreciable basis) \$65,000
Sales revenues, each year \$60,000
Operating costs excl. depr'n \$25,000
Tax rate 35.0%

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1. Depreciation for the first year = 33% of equipments= 21450

Sales 60000
Less Operating costs 25000
Less Depreciation 21450
Profit before taxes 13550
Less taxes 4743
Profit after taxes 8808
Cash flow after taxes 30258

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2. h?

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