Question

37. You are evaluating a potential purchase of several light-duty trucks. The initial cost of the trucks will be $143,000. The trucks fall in the MACRS 5-year class that allows depreciation of 20% the first year, 32% the second year, 19% the third year, 12% the fourth year, 11% the fifth year, and 6% the sixth year. You expect to sell the trucks for 20,000 at the end of five years. The expected revenue associated with the trucks is $105,000 per year with annual operating costs of $57,000. The firm's marginal tax rate is 30.0%. What is the after-tax operating cash flow for year 1?

Answer 1

Sales	$         105,000
Less:
Costs	$           57,000
Depreciation	$           28,600	=143000*0.2
EBT	$           19,400
Less: Tax payable @ 30%	$              5,820
Net income	$           13,580
Add: Depreciation	$           28,600
Operating cash flow	$ 42,180