Lightweight Industries Is Considering Purchasing a New Forklift That,if Adopted,is

question 14

Multiple Choice

Lightweight Industries is considering purchasing a new forklift that,if adopted,is expected to yield an EBDIT of $23,000 per year for the next five years.The forklift will cost the company $100,000 and is expected to be depreciated for tax and accounting purposes on a straight- line basis over a five- year life.The company tax rate is 30% per annum.The company's cost of capital is 12.5% p.a.How much is the cash flow per annum generated by this project in years one through five?

• A)$21,350.00
• B)$16,100.00
• C)$20,088.00
• D)$22,100.00

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Definitions:

Mispriced Securities

Financial instruments whose market price does not accurately reflect their intrinsic value, potentially leading to buying or selling opportunities.

Risk Arbitrage

Speculation on perceived security mispricing, often in connection with merger and acquisition targets.

One-Factor APT

A financial model that describes the relationship between a security's returns and a single factor affecting all securities, used to predict performance.

Risk-Free Rate

The theoretical rate of return on an investment with zero risk, typically represented by government bonds of a stable country.