A Project Will Reduce Costs by $62,750 but Increase Depreciation

question 45

Multiple Choice

A project will reduce costs by $62,750 but increase depreciation by $14,812.What is the operating cash flow of this project based on the tax shield approach if the tax rate is 34 percent?

• A)$41,415.00
• B)$31,639.08
• C)$38,211.19
• D)$42,006.20
• E)$46,451.08

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Definitions:

Accounting Period

A specific time frame for which financial statements are prepared, to measure the performance and financial position of a business.

Net Income

The total profit of a company after all expenses and taxes have been subtracted from revenue, indicating the company's financial performance over a specific period.

Specific Identification Method

An inventory costing method in which costs are assigned to individual items, enabling precise cost determination of goods sold and ending inventory.

Inventory Cost

The total cost associated with acquiring goods for sale, including purchase price, taxes, and shipping.