Consider a Capital Expenditure Project with an Expected 10-Year Economic

question 38

Multiple Choice

Consider a capital expenditure project with an expected 10-year economic life and forecasted revenues equal to $40,000 per year; cash expenses are estimated to be $29,000 per year. The cost of the project equipment is $23,000, and the equipment's estimated salvage value at the end of the project is $9,000. The equipment's $23,000 cost will be depreciated using MACRS depreciation (7-year asset) . The project requires a $7,000 working capital investment in year 0 and another $5,000 in year 5. The company's marginal tax rate is 40%. Calculate the expected net cash flow in year 10 of the project.

• A) $32,000
• B) $27,000
• C) $24,000
• D) $18,000

---

Definitions:

External Stimulus

An event or factor outside the body that influences an individual's physiological or psychological response.

Drive-Reduction

A psychological theory that posits the reduction of physiological needs drives behavior, aiming to reduce the state of tension or arousal caused by unmet needs.

Homeostasis

The process by which a living organism or cell maintains stable internal conditions despite changes in its external environment.

Set-Point Theory

The hypothesis that the body regulates its weight and energy levels around a specific baseline, determined by genetics and environmental factors.