Consider a Capital Expenditure Project with an Expected 10-Year Economic

question 122

Multiple Choice

Consider a capital expenditure project with an expected 10-year economic life and forecasted revenues equal to $40,000 per year; cash expenses are estimated to be $29,000 per year. The cost of the project equipment is $23,000, and the equipment's estimated salvage value at the end of the project is $9000. The equipment's $23,000 cost will be depreciated using MACRS depreciation (7-year asset) . The project requires a $7,000 working capital investment in year 0 and another $5,000 in year 5. The working capital investment is recovered in the final year of the project. The company's marginal tax rate is 40%. Calculate the expected net cash flow in year 10 of the project.

• A)$32,000
• B)$27,000
• C)$24,000
• D)None of the above

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Definitions:

Empty-Nest Syndrome

A feeling of loneliness or sadness that parents may experience when their children grow up and leave home to start their own lives.

Children Leave Home

The phase in a family's life cycle when offspring grow up and move out to live independently, often marking a significant transition for both children and parents.

Parents

Parents are caregivers of the child; they play significant roles in child-rearing and development, providing support, education, love, and discipline.

Married

The state of being in a legally recognized union between two individuals, typically involving public and institutional recognition.