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%.

• A) $26,996
• B) $332,206
• C) $237,082
• D) $383,206

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Definitions:

Strategic Human Resource Planning

The proactive management of an organization's employees focusing on aligning HR strategies with business objectives to gain a competitive advantage.

Workforce Forecasting

The process of predicting an organization's future labor needs, including the number, type, and quality of employees required to meet its objectives.

HR Supply

The availability of potential or existing employees to fill the jobs within an organization, both now and in the future.

Succession Management

The practice of finding and nurturing new leaders to take over when current leaders leave, retire, or die.