CathFoods Will Release a New Range of Lollies Which Contain

question 57

Multiple Choice

CathFoods will release a new range of lollies which contain antioxidants. New equipment to manufacture the candy will cost $2 million, which will be depreciated by straight-line depreciation over five years. In addition, there will be $5 million spent on promoting the new line. It is expected that the range of lollies will bring in revenues of $4 million per year for five years with production and support costs of $1.5 million per year. If CathFood's marginal tax rate is 30%, what are the incremental free cash flows in the second year of this project?

• A) $2.415 million
• B) $2.500 million
• C) $2.015 million
• D) $1.870 million

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Definitions:

Status Offense

An action that is considered a violation of the law only because of the offender’s status as a minor, such as truancy or running away from home.

Running Away

An act often associated with children or adolescents leaving home or a care situation, typically to escape perceived issues or conflicts.

Primary School

The first stage of formal education, typically for children from about five to eleven years old.

James Marcia's Identity Statuses

A framework identifying four stages of psychological identity development: achievement, moratorium, foreclosure, and diffusion.