Louie's Leisure Products Is Considering a Project Which Will Require

question 150

Multiple Choice

Louie's Leisure Products is considering a project which will require the purchase of $1.4 million in new equipment. The equipment belongs in a 20% CCA class. Louie's expects to sell the equipment
At the end of the project for 20% of its original cost. Annual sales from this project are estimated at
$1) 2 million. Net working capital equal to 20% of sales will be required to support the project. All of
The net working capital will be recouped at the end of the project. The firm desires a minimal 14%
Rate of return on this project. The tax rate is 34%.
What is the recovery amount attributable to net working capital at the end of the project?

• A) $55,200
• B) $81,600
• C) $159,600
• D) $240,000
• E) $424,800

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Definitions:

Crop Dusting

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The use of explosives to break rock for excavation purposes or to demolish structures.

Reasonable Person Standard

A legal standard that measures behavior against how a hypothetical, reasonable and prudent person would have acted under similar circumstances.

Mental Deficiency

A term historically used to describe a range of intellectual disabilities, but now often considered outdated and insensitive.