Ernie's Electrical Is Evaluating a Project That Will Increase Sales

question 73

Multiple Choice

Ernie's Electrical is evaluating a project that will increase sales by $48,000 and costs by $16,000.The project will initially cost $89,000 for fixed assets that will be depreciated straight-line to a zero book value over the 6-year life of the project.The applicable tax rate is 34 percent.What is the project's annual operating cash flow?

• A)$23,300.13
• B)$21,450.87
• C)$26,163.33
• D)$22,406.67
• E)$18,180.09

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Definitions:

MTBF

Mean Time Between Failures; a reliability measure of the average time a product or system operates before failing.

Component Reliability

The probability that an individual part or component of a system performs its intended function under specified conditions for a designated period of time.

Preventive Maintenance

Regular and systematic inspection, cleaning, and replacement of worn parts, materials, and systems to prevent sudden failure and downtime.

Breakdown Maintenance

Maintenance work performed after a machine or system fails to restore it to operational condition.