Hollister & Hollister Is Considering a New Project

question 83

Multiple Choice

Hollister & Hollister is considering a new project.The project will require $535,000 for new fixed assets,$218,000 for additional inventory,and $39,000 for additional accounts receivable.Short-term debt is expected to increase by $165,000.The project has a 6-year life.The fixed assets will be depreciated straight-line to a zero book value over the life of the project.At the end of the project,the fixed assets can be sold for 20 percent of their original cost.The net working capital returns to its original level at the end of the project.The project is expected to generate annual sales of $875,000 and costs of $640,000.The tax rate is 31 percent and the required rate of return is 14 percent.What is the amount of the aftertax cash flow from the sale of the fixed assets at the end of this project?

• A)$35,496
• B)$73,830
• C)$104,400
• D)$287,615
• E)$344,520

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Definitions:

Deficient Fluid Volume

A medical condition where there is a lower than required volume of fluid in the body, also known as dehydration, leading to various health issues.

Tachycardia

Rapid regular heart rate ranging between 100 and 150 beats/min.

Increased Thirst

An abnormally strong desire to drink fluids, often a symptom of dehydration or a sign of a significant medical condition like diabetes.

Decreased Cardiac Output

A condition where the heart pumps less blood than normal, affecting the body's ability to supply oxygen and nutrients to tissues.