A Project Will Require $512,000 for Fixed Assets and $47,000

question 12

Multiple Choice

A project will require $512,000 for fixed assets and $47,000 for net working capital. The fixed assets will be depreciated straight-line to a zero book value over the six-year life of the project. No bonus depreciation will be taken. At the end of the project, the fixed assets will be worthless. The net working capital returns to its original level at the end of the project. The project is expected to generate annual sales of $965,000 and costs of $508,000. The tax rate is 21 percent and the required rate of return is 14.7 percent. What is the amount of the annual operating cash flow?

• A) $283,633.33
• B) $447,826.67
• C) $378,950.00
• D) $245,300.00
• E) $198,300.00

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Definitions:

Confidence Interval

A statistical range, with a given probability, that contains the true parameter of interest.

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The variable in a study or experiment that is expected to change in response to changes in another variable, called the independent variable.

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A variable used in statistical models to forecast outcomes or trends.