Question:
COMPUTATION OF AFTER-TAX CASH FLOWS
Masamora Company is considering two independent projects. One project involves a new product line, and the other involves the acquisition of forklifts for the materials handling department. The projected annual operating revenues and expenses are as follows:
Project I (investment in a new product)
|
Revenues
|
$ 90,000
|
|
Cash expenses
|
(45,000)
|
|
Depreciation
|
(15,000)
|
|
Income before income taxes
|
$ 30,000
|
|
Income taxes
|
(12,000)
|
|
Net income
|
$ 18,000
|
Project II (acquisition of two forklifts)
|
Cash expenses
|
$30,000
|
|
Depreciation
|
30,000
|
Required:
Compute the after-tax cash flows of each project. The tax rate is 40 percent and includes federal and state assessments.