Use the Information for the Question(s)below

question 9

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 manufacturing cost 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 21% tax bracket,and has a cost of capital of 10%.
-The incremental EBIT in the first year for the Sisyphean Corporation's project is closest to:

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

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Definitions:

Scheme

In psychology, a cognitive framework or concept that helps organize and interpret information, allowing individuals to categorize and understand new experiences.

Telegraphic Speech

A stage of language development where toddlers speak in short, simple combinations of words that omit less important words, resembling telegraph messages.

Language Acquisition Device

A theoretical construct in the field of linguistics that suggests an innate capability or mechanism in the human brain that allows children to naturally learn language.

Neural Prewiring

The pre-established network of neurons in the brain, responsible for innate abilities and predispositions.