Com-Cat Is Considering Expanding Their Current Production Facility

question 5

Multiple Choice

Com-Cat is considering expanding their current production facility. This year Com-Cat had an operating income (EBIT) of $760,000, interest expenses of $120,000, depreciation expenses of $45,000, and capital expenditures of $160,000. Next year, after the expansion is completed, operating income is expected to be $880,000, interest expenses will remain at $120,000, but depreciation will increase to $61,000. To support the expansion, cash is expected to increase by $5,000, accounts receivable by $12,000, inventories by $8,000, and accounts payable by $7,000. What is the change in Com-Cat's net operating cash flows attributable to this project if the tax rate is 40%?

• A) $80,400
• B) $88,000
• C) $106,000
• D) $70,000

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Definitions:

Task Significance

The extent to which a job has a substantial impact on the lives or work of other people, either within the organization or externally.

Task Identity

The extent to which a task necessitates the finishing of a complete and recognizable body of work.

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The right or condition of self-government, or in a workplace context, the degree of freedom an employee has in their job.

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The practice of working from a remote location, often from home, using the internet, and telecommunications.