You work for Dowling Inc., which is considering a new project whose data are sho

Question

You work for Dowling Inc., which is considering a new project whose data are shown below. What is the project%u2019s Year 1 cash flow?

Sales revenues, each year                                                  $62,500

Depreciation                                                                          $8,000

Other operating costs                                                         $25,000

Interest expense                                                                    $8,000

Tax rate                                                                                   35.0%

Explanation / Answer

What is the projects Year 1 cash flow?

Year 1 cashflow = (62500 -25000-8000)*0.65 + 8000*0.35 = $21975

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