A Project Will Require $543,000 for Fixed Assets, $118,000 for Inventory

question 78

Multiple Choice

A project will require $543,000 for fixed assets, $118,000 for inventory, and $142,000 for accounts receivable. Short-term debt is expected to increase by $65,000. The project has a six-year life. The fixed assets will be depreciated straight-line to a zero book value over the life of the project. No bonus depreciation will be taken. The project is expected to generate annual sales of $905,000 with costs of $730,000. What is the project's cash flow at Time 0?

• A) −$536,000
• B) −$738,000
• C) −$720,000
• D) −$779,000
• E) −$944,000

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Definitions:

Intellectualization

A coping strategy that employs logic to avoid facing an internal conflict and the emotional turmoil it brings.

Detaching

The process of emotionally or physically distancing oneself from a person, situation, or thought.

Projection

A defense mechanism in psychology where individuals attribute their own unacceptable thoughts, feelings, or motives to another person.

Reaction Formation

This defense mechanism involves the disguising of one's own threatening impulses by attributing them to others in an exaggerated or opposite form, as a means of coping with anxiety.