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Champlain Transportation Inc. is considering a five-year project that requires an initial capital investment of $1...

  1. Champlain Transportation Inc. is considering a five-year project that requires an initial capital investment of $1 million. The project is expected to generate operating revenue of $500,000 per year, and the associated operating expenses are estimated at $250,000 per year. The capital asset belongs to asset class 9, which has a CCA rate of 30 percent. The firm’s tax rate is 35 percent. What is the after-tax cash flow for year 1?
  1. $110,000
  2. $215,000
  3. $302,500
  4. $312,500
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Answer #1
Computation of after tax 1 year cash flow
operating revenue        500,000
operating expenses        250,000
Depreciation
1000000*30%/2 150000
Profit before tax 100,000.00
Tax @ 35%     35,000.00
Net income     65,000.00
Cash flow = Net income + depreciation= 215,000.00
answer is option = B 215000
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