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.