Exhibit 10-1 You Have Been Asked by the President of Your Company

question 72

Multiple Choice

Exhibit 10-1
You have been asked by the president of your company to evaluate the proposed acquisition of a new special- purpose truck. The truck's basic price is $50,000, and it will cost another $10,000 to modify it for special use by
your firm. The truck falls into the MACRS three-year class, and it will be sold after three years for $20,000. Use of the truck will require an increase in net working capital (spare parts inventory) of $2,000. The truck will have no effect on revenues, but it is expected to save the firm $20,000 per year in before-tax operating costs, mainly labor. The firm's marginal tax rate is 40 percent.
-Refer to Exhibit 10-1.What is the incremental operating cash flow in Year 1?

• A)$17,820
• B)$18,254
• C)$19,920
• D)$20,121
• E)$21,737

---

Definitions:

Stress

A state of mental or emotional strain or tension resulting from adverse or demanding circumstances.

Challenging Events

Situations or occurrences that test one's abilities, resilience, or resources, often prompting growth or change.

B Lymphocytes

A type of white blood cell that plays a critical role in the adaptive immune system by secreting antibodies to fight off pathogens.

Bone Marrow

A soft, spongy tissue found inside bones, responsible for the production of blood cells in the body.