1. A company is evaluating a 5-year project that will increase annual sales by $10,000 and annual cost by 80,000. The project needs a MACRS 3 years equipment at a cost of $60,000. The applicable tax rate is 30%. What are the OCF for the project in year 4 and year 5 respectively?
A $1,999 ; $15,334 B $15,334 ; $14,000 C $15,334; $0
2. A 5-year project needs an equipment at a cost of $60,000. The applicable tax rate is 30% and the 3-year MACRS is used. What is the after-tax salvage if the equipment can be sold at $20,000 at the end of the project.
A $20,000 B $14,000 C $15,333