Problem 1.) You work for the Sing Oil Company, which is considering a new project whose data are shown below. What is the project's operating cash flow for Year 1?
Sales revenues, each year $55,000
Depreciation $8,000
Other operating costs $25,000
Interest expense $8,000
Tax rate 35.0%
Problem 2) Salvage value calculations
Bing Services is now in the final year of a project. The equipment originally cost $20,000, of which 75% has been depreciated. Bing can sell the used equipment today for $6,000, and its tax rate is 40%. What is the equipment's net after-tax salvage value for use in a capital budgeting analysis? Note that if the equipment's final market value is less than its book value, Bing will receive a tax credit as a result of the sale.