You Have Been Asked by the President of Your Company

question 37

Multiple Choice

You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck for $70,000. The truck falls into the MACRS three-year class, and it will be sold after three years for $5,000. Use of the truck will require an increase in NWC (spare parts inventory) of $10,000. The truck will have no effect on revenues, but it is expected to save the firm $32,000 per year in before-tax operating costs, mainly labor. The firm's marginal tax rate is 21 percent. What will the operating cash flow for this project be during year 2?

• A) $531
• B) $885
• C) $31,814
• D) $50,315

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Definitions:

Crisis Management

The process by which an organization deals with a disruptive and unexpected event that threatens to harm the entity or its stakeholders.

Social Media

Platforms and technologies that enable users to create, share content, and participate in social networking.

Organizational Crisis

A critical event or turning point that threatens an organization’s health and survival, requiring urgent and effective response.

External Threats

External threats are potential harms originating from outside an organization that could negatively impact its operations or assets, including cyber attacks, market competition, and regulatory changes.