A Lotta Bread Corp

question 83

Multiple Choice

A Lotta Bread Corp. is replacing an entire baking line that was purchased for $420,000 and currently has a book value of $60,000. The new more efficient line will cost $940,000 installed and can be depreciated as a 7-year MACRS asset. With the increased efficiency, Lotta expects annual revenues to increase by $425,000 and operating expenses to increase by $170,000. The older machine, which was being depreciated at the straight-line rate of $20,000/year, will be sold for $30,000. What are the net cash flows for year 2? Assume the firm's marginal tax rate is 40% and that the year 2 depreciation rate is 24.49%.

Definitions:

Erik Erikson

A developmental psychologist known for his theory on the psychosocial development of human beings across eight stages of life.

Gestalt Psychologists

Psychologists who focus on human perception and cognitive processes, emphasizing that the whole of anything is greater than its parts.

Basic Units

Fundamental components or building blocks that form the basis of a complex structure or system.

Sociocultural Psychologists

Professionals in psychology who examine how social and cultural factors influence human behavior and mental processes.