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.