Use the Following Information to Answer the Question(s)below

question 76

Multiple Choice

Use the following information to answer the question(s) below.
(Include the MACRS Table from the Appendix. )
Casa Grande Farms is considering purchasing multiple tractors for a total purchase price of $540,000.These tractors are expected to generate EBITDA of $250,000 for each of the next three years.Casa Grande Farms has a 35% tax rate and has a cost of capital of 10%.
-Assume that Casa Grande Farms is planning to sell the tractors after two years,when its book value is $119,988,for a total price of $180,000.What is the effect on free cash flow in the year it is sold?

• A)A cash inflow of $60,012
• B)A cash outflow of $60,012
• C)A cash inflow of $39,008
• D)A cash outflow of $39,008