Fitzgerald Computers Is Considering a New Project Whose Data Are

question 74

Multiple Choice

Fitzgerald Computers is considering a new project whose data are shown below.The required equipment has a 3-year tax life, after which it will be worthless, and it will be depreciated by the straight-line method over 3 years.Revenues and other operating costs are expected to be constant over the project's 3-year life.What is the project's Year 1 cash flow? $\begin{array}{lr}\text { Equipment cost (depreciable basis) } & \$ 65,000 \\\text { Straight-line depreciation rate } & 33.333 \% \\\text { Sales revenues, each year } & \$ 60,000 \\\text { Operating costs (excl. deprec) } & \$ 25,000 \\\text { Tax rate } & 25.0 \%\end{array}$

• A) $29,351
• B) $30,103
• C) $30,875
• D) $31,667
• E) $32,458

Understand the concepts of owner financing, investing activities, and how revenues, expenses, and investments affect equity.

Realize the significance of measuring and analyzing return on assets as a performance indicator.

Understand the purpose and time frame covered by the balance sheet and income statement.

Comprehend the structure and components of the four basic financial statements.

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Definitions:

Organic Reaction

A chemical reaction involving organic compounds where the carbon atoms are restructured, leading to the formation of new substances.