Newton Industries Is Considering a Project and Has Developed the Following

question 54

Multiple Choice

Newton Industries is considering a project and has developed the following estimates: unit sales = 4,800, price per unit = $67, variable cost per unit = $42, annual fixed costs = $11,900.The depreciation is $14,700 a year and the tax rate is 34 percent.What effect would an increase of $1 in the selling price have on the operating cash flow?

• A)$3,168
• B)$4,823
• C)$1
• D)$83,448
• E)$82,368

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Definitions:

Annual Cost

The total expenses associated with maintaining or operating something over the course of a year.

Useful Life

The estimated period over which a fixed asset is expected to be useful to the owning entity, crucial for calculating depreciation.

Machine

Equipment or devices designed to perform specific tasks, often used in manufacturing and production processes.

Internal Rate

Commonly denotes the internal rate of return (IRR), the discount rate at which the net present value (NPV) of all cash flows from a specific project is zero.