Fool Proof Software is considering a new project whose data are shown below.The equipment has an economic life of 3 years,and is in the CCA class 10 (30%).Revenues and cash operating costs are expected to be constant over the project's 3-year life.What is the net operating cash flow for Year 1? $\begin{array}{lr}
\text { Equipment cost } & \$ 65,000 \
\text { Annual sales revenues } & \$ 60,000 \
\text { Annual cash operating costs } & \$ 25,000 \
\text { Tax rate } & 35.0 \%
\end{array}$
A)$26,162.50
B)$28,770.00
C)$30,359.25
D)$25,275.50

Question

Quizplus · Accepted Answer

The net operating cash flow for Year 1 is calculated as follows:  1. Calculate depreciation using the CCA rate: Depreciation = $65,000 * 30% = $19,500.  2. Calculate taxable income: Taxable Income = Sales - Operating Costs - Depreciation = $60,000 - $25,000 - $19,500 = $15,500.  3. Calculate taxes: Taxes = Taxable Income * Tax Rate = $15,500 * 35% = $5,425.  4. Calculate net operating cash flow: Net Operating Cash Flow = (Sales - Operating Costs - Taxes) + Depreciation = ($60,000 - $25,000 - $5,425) + $19,500 = $26,162.50.

Fool Proof Software Is Considering a New Project Whose Data