Judson Industries Is Considering a New Project

question 20

Multiple Choice

Judson Industries is considering a new project. The project will initially require $749,000 for new fixed assets, $238,000 for additional inventory, and $25,000 for additional accounts receivable.
Accounts payable is expected to increase by $70,001. The fixed assets will belong in a 30% CCA
Class. At the end of the project, in four years' time, the fixed assets can be sold for 40% of their
Original cost. The net working capital will return to its original level at the end of the project. The
Project is expected to generate annual sales of $944,000 with related cash expenses of $620,001.
The tax rate is 35% and the required rate of return is 14%. What is the initial cash outflow of this
Project?

• A) $749,000
• B) $942,000
• C) $1,082,000
• D) $1,152,600
• E) $1,203,400

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