What is the tax rate expected to be in year one

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Middlefield Motors is evaluating project A, which would require the purchase of a piece of equipment for 344,000 dollars. During year 1, project A is expected to have relevant revenue of 178,000 dollars, relevant costs of 62,000 dollars, and some depreciation. Middlefield Motors would need to borrow 344,000 dollars for the equipment and would need to make an interest payment of 27,520 dollars to the bank in year 1. Relevant net income for project A in year 1 is expected to be 32,000 dollars and operating cash flows for project A in year 1 are expected to be 111,000 dollars. Straight-line depreciation would be used. What is the tax rate expected to be in year 1?

Reference no: EM131130835

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