Use the Information for the Question(s)below

question 18

Multiple Choice

Use the information for the question(s) below.
The Sisyphean Corporation is considering investing in a new cane manufacturing machine that has an estimated life of three years.The cost of the machine is $30,000 and the machine will be depreciated straight line over its three-year life to a residual value of $0.
The cane manufacturing machine will result in sales of 2000 canes in year 1.Sales are estimated to grow by 10% per year each year through year three.The price per cane that Sisyphean will charge its customers is $18 each and is to remain constant.The canes have a cost per unit to manufacture of $9 each.
Installation of the machine and the resulting increase in manufacturing capacity will require an increase in various net working capital accounts.It is estimated that the Sisyphean Corporation needs to hold 2% of its annual sales in cash,4% of its annual sales in accounts receivable,9% of its annual sales in inventory,and 6% of its annual sales in accounts payable.The firm is in the 35% tax bracket,and has a cost of capital of 10%.
-The incremental unlevered net income in the first year for the Sisyphean Corporation's project is closest to:

• A)$8000
• B)$18,000
• C)$5200
• D)$11,700

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Definitions:

Dissociative Disorder

A psychological disorder marked by a disruption and inconsistency among one's thoughts, memories, environment, behaviors, and sense of self.

Dr. Jekyll

A character from Robert Louis Stevenson's novella, representing the good side of a person's dual nature.

Mr. Hyde

A fictional character from Robert Louis Stevenson's novella "Strange Case of Dr Jekyll and Mr Hyde," representing the evil side of Dr. Jekyll unleashed by a potion.

Antisocial Personality

A personality disorder characterized by a long-term pattern of disregard for, or violation of, the rights of others.