You Have Been Asked by the President of Your Company

question 87

Multiple Choice

You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck for $75,000. The truck falls into the MACRS three-year class, and it will be sold after three years for $13,000. Use of the truck will require an increase in NWC (spare parts inventory) of $5,000. The truck will have no effect on revenues, but it is expected to save the firm $20,000 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 3?

• A) $5,335
• B) $8,892
• C) $9,443
• D) $18,133

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Definitions:

Technical/Human Orientation

A theoretical perspective emphasizing the balance between technological skills and human social skills in organizational contexts.

Time Orientation

refers to the way individuals or cultures perceive and value time, influencing priorities, punctuality, and planning.

Qualitative Methods

Investigative techniques that gather and examine qualitative data to grasp ideas, perceptions, or experiences.

Descriptiveness

The aspect of providing detailed information or an accurate depiction of events, processes, or characteristics.