Rock Haven Has a Proposed Project That Will Generate Sales

question 36

Multiple Choice

Rock Haven has a proposed project that will generate sales of 1,680 units annually at a selling price of $22 each.The fixed costs are $12,700 and the variable costs per unit are $5.95.The project requires $28,000 of fixed assets that will be depreciated on a straight-line basis to a zero book value over the four-year life of the project.The salvage value of the fixed assets is $6,900 and the tax rate is 34 percent.What is the operating cash flow for year 4?

• A)$11,794
• B)$12,417
• C)$14,258
• D)$16,348
• E)$16,971

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Definitions:

Current Market

The existing state of the market, including current prices, volumes, and trends, reflecting the most recent period of trading.

TIPS Bond

Treasury Inflation-Protected Securities (TIPS) are U.S. government bonds that are indexed to inflation in order to protect investors from the negative effects of rising prices.

Coupon Rate

The annual interest rate paid by a bond issuer to its bondholders, expressed as a percentage of the bond's face value.

Inflation Rate

The speed at which prices for products and services ascend, resulting in a decline in how much can be bought.