Unique Style Inc.is considering a five-year expansion project that requires an initial investment of $500,000 for the purchase of a new machine with a CCA rate of 30 percent.The projected sales revenue and related costs are $450,000 and $180,000 per year,respectively.The project's fixed costs are an additional $48,000 per year.The appropriate discount rate is 8 percent.The firm's marginal tax rate is 40 percent.What is the after-tax cash flow in year three?

Question

Quizplus · Accepted Answer

CCA₃ = $500,000*(1 - 30%/2)*(1 - 30%)*30% = $89,250 CFAT₃ = ($450,000 − $180,000 − $48,000)*(1 - 40%)+ $89,250*40% = $168,900