Boynes Corporation is considering a capital budgeting project that would require investing $200,000 in equipment with an expected life of 4 years and zero salvage value. Annual incremental sales would be $490,000 and annual incremental cash operating expenses would be $330,000. The project would also require an immediate investment in working capital of $10,000 which would be released for use elsewhere at the end of the project. The project would also require a one-time renovation cost of $70,000 in year 3. The company's income tax rate is 30% and its after-tax discount rate is 14%. The company uses straight-line depreciation. Assume cash flows occur at the end of the year except for the initial investments. The company takes income taxes into account in its capital budgeting. The total
cash flow net of income taxes in year 3 is:
A. $78,000
B. $57,000
C. $90,000
D. $127,000
Answer: A
You might also like to view...
A new manufacturing machine is expected to cost $278,000, have an eight-year life, and a $30,000 salvage value. The machine will yield an annual incremental after-tax income of $35,000 after deducting the straight-line depreciation. Compute the payback period for the purchase.
A. 3.8 years. B. 5.4 years. C. 7.3 years. D. 8.7 years. E. 4.2 years.
Which Six Sigma DMAIC phase focuses on why and how defects and errors occur?
A) control B) define C) measure D) analyze
Which of the following characterizes organizational buyer-seller relationships?
A. Purchases are often made after lengthy or complex negotiations. B. Reciprocal arrangements are illegal. C. Purchases are usually of small dollar values. D. Short-term contracts are often prevalent. E. Delivery schedules are less important than production capacity.
The stages in the life of a transaction exposure can be broken into three distinct time periods. The first time period is the time between quoting a price and reaching an actual sale agreement or contract
The next time period is the time lag between taking an order and actually filling or delivering it. Finally, the time it takes to get paid after delivering the product. In order, these stages of transaction exposure may be identified as: A) backlog, quotation, and billing exposure. B) billing, backlog, and quotation exposure. C) quotation, backlog, and billing exposure. D) quotation, billing, and backlog exposure.