Use the Information for the Question(s)below

question 11

Multiple Choice

Use the information for the question(s) below.
Temporary Housing Services Incorporated (THSI) is considering a project that involves setting up a temporary housing facility in an area recently damaged by a hurricane.THSI will lease space in this facility to various agencies and groups providing relief services to the area.THSI estimates that this project will initially cost $5 million to set up and will generate $20 million in revenues during its first and only year in operation (paid in one year) .Operating expenses are expected to total $12 million during this year and depreciation expense will be another $3 million.THSI will require no working capital for this investment.THSI's marginal tax rate is 35%.
-Ignoring the original investment of $5 million,what is THSI's free cash flow for the first and only year of operation?

• A)$5.0 million
• B)$3.75 million
• C)$8.0 million
• D)$6.25 million

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Definitions:

Off-site Employees

Workers who perform their job functions outside of the traditional office setting, such as remote or telecommute positions.

Fixed Position Layout

An arrangement where the product being worked on remains stationary, and workers, materials, and equipment move around it.

Takt Times

The pace at which products must be completed to meet customer demand, calculated as available production time divided by the quantity of product needed.

High-draw Items

Products or goods that consistently generate high demand from consumers or businesses.