A Lotta Bread Corp

question 83

Multiple Choice

A Lotta Bread Corp. is replacing an entire baking line that was purchased for $420,000 and currently has a book value of $60,000. The new more efficient line will cost $940,000 installed and can be depreciated as a 7-year MACRS asset. With the increased efficiency, Lotta expects annual revenues to increase by $425,000 and operating expenses to increase by $170,000. The older machine, which was being depreciated at the straight-line rate of $20,000/year, will be sold for $30,000. What are the net cash flows for year 2? Assume the firm's marginal tax rate is 40% and that the year 2 depreciation rate is 24.49%.

Definitions:

Affectual Awareness

The capacity to recognize, understand, and process one's own emotions or feelings.

Self-Instruction Training

A treatment developed by Donald Meichenbaum that teaches people to use coping self-statements at times of stress, discomfort, or significant pain. Also called stress inoculation training.

Systematic Desensitization

A behavioral therapy technique used to reduce phobic reactions and anxiety through gradual exposure to the feared object or situation while practicing relaxation techniques.

Sex Therapy

A form of psychotherapy aimed at addressing concerns related to sexual function, sexual feelings, and intimacy, often involving education, counseling, and behavioral exercises.