What Is the Undiscounted Cash Flow in the Final Year

question 49

Multiple Choice

What is the undiscounted cash flow in the final year of an investment, assuming: 10,000 after-tax cash flows from operations, the fully depreciated machine, the sole asset in the pool, is sold for $1,000, the project had required $2,000 in additional working capital, and a 35 percent tax rate?

• A)$8,450
• B)$12,600
• C)$12,650
• D)$14,000

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Definitions:

Par Common Stock

This is a classification of common stock that has a nominal value assigned in the corporate charter and is used in the accounting records.

Shares

Units of ownership in a company or financial asset.

Retained Earnings

The portion of a business's profits not distributed to shareholders, instead being reinvested in the business or used to pay off debt.

Net Income

The total amount of profit earned by a company after all expenses and taxes have been deducted from total revenue.