Your New Employer, Freeman Software, Is Considering a New Project

Multiple Choice

Your new employer, Freeman 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 33.33%, 44.45%, 14.81%, and 7.41% for Years 1 through 4.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? $\begin{array}{lr}\text { Equipment cost (depreciable basis) } & \$ 65,000 \\\text { Sales revenues, each year } & \$ 60,000 \\\text { Operating costs (excl. deprec) } & \$ 25,000 \\\text { Tax rate } & 25.0 \%\end{array}$

A) $31,666
B) $31,849
C) $33,442
D) $35,114
E) $36,869