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:

Mortgage Interest

The interest charged on a loan used to purchase a property, often tax-deductible for the borrower.

Depreciation

An accounting method that allocates the cost of a tangible asset over its useful life.

Cost Recovery

The method by which businesses deduct or amortize the cost of property over a period, for tax purposes, to recover the expense of capital investments.

Net Loss

Net loss occurs when a company's expenses exceed its revenues during a specific period, reflecting a decrease in net assets from operations and other activities.