Case Study 12
First Cost of Equipment = $150,000
Market

Case Study 12
First cost of equipment = $150,000
Market value at the end of year 6 = $30,000
MACRS depreciation is used. The equipment is a 5-year property.
Incremental income-tax rate for the company = 35%
$$\begin{array} { | l | l | l | l | l | l | l | l | } \hline \text { Year } & 0 & 1 & 2 & 3 & 4 & 5 & 6 \\\hline \text { BT-CF in } \$ & - 150 \mathrm {~K} & 60 \mathrm {~K} & 63 \mathrm {~K} & 66 \mathrm {~K} & 69 \mathrm {~K} & 72 \mathrm {~K} & 75 \mathrm {~K} \\\hline \begin{array} { l } \text { ORM } \\\text { Expenses }\end{array} & & 10 \mathrm {~K} & 13 \mathrm {~K} & 16 \mathrm {~K} & 19 \mathrm {~K} & 22 \mathrm {~K} & 25 \mathrm {~K} \\\hline\end{array}$$
-The first-year after tax-cash flow is _____________.

A) $33,000
B) $27,000
C) $53,000
D) $40,000