Your company, CSUS Inc., is considering a new project whose data are shown below. The required equipment has a 3-year tax life, and the accelerated 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 expected operating life. What is the project's Year 4 cash flow?
A) $11,814
B) $12,436
C) $13,090
D) $13,745
E) $14,432

Question

Quizplus · Accepted Answer

The Year 4 cash flow is calculated by considering the depreciation tax shield and the constant revenues and operating costs. Since the equipment has a 3-year tax life, by Year 4, the depreciation is complete, and the cash flow is primarily from operations.

Your Company, CSUS Inc