Bi-Lo Traders Is Considering a Project That Will Produce Sales

question 1

Multiple Choice

Bi-Lo Traders is considering a project that will produce sales of $28,000 and increase cash expenses by $17,500.If the project is implemented,taxes will increase by $3,000.The additional depreciation expense will be $1,600.An initial cash outlay of $1,400 is required for net working capital.What is the amount of the operating cash flow using the top-down approach?

• A)$4,500
• B)$5,900
• C)$6,100
• D)$7,500
• E)$8,900

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Definitions:

Operating Income

This is the profit realized from a business's core operations, indicating the financial health of the business by excluding the effects of financing and investments.

Fixed Assets

Long-term tangible pieces of property or equipment a company owns and uses in its operations for generating income.

NPV

Net Present Value; a calculation used to determine the value of an investment by discounting future cash flows to present terms.

Land

Immovable property comprising the ground, along with any natural or artificial structures on it, not including movable assets.