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Vandelay Industries is considering a new project with a 6​-year life with the following cost and...

Vandelay Industries is considering a new project with a 6​-year life with the following cost and revenue data. This project will require an investment of $ 100 comma 000 in new equipment. This new equipment will be depreciated down to zero over 6 years using the simplified​ straight-line method and has no salvage value. This new project will generate additional sales revenue of $ 122 comma 000 while additional operating​ costs, excluding​ depreciation, will be $ 68 comma 000. ​Vandelay's marginal tax rate is 33 percent. What is the​ project's free cash flow in year​ 1?

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Answer #1
Year-1
Revenue             122,000
Less: Operating Cost @ 60%                68,000
Contribution               54,000
Less: Depreciation (100,000/6)                16,660
Profit before tax               37,340
Tax @ 33%                12,322
Profit After Tax               25,018
Add Depreciation                16,660
Cash Profit After tax               41,678
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