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:

Righttosue Clause

A provision within a contract or law that grants an individual the authority to pursue legal action should their rights be violated.

Just Cause

A legal standard that employers must meet to justify disciplinary actions or termination, proving that actions taken were due to reasonable grounds.

Economic Reason

Refers to motivations or justifications based on economic factors, such as cost, efficiency, or profitability.

Bumping Rights

Preferential rights allowing more senior employees to displace less senior ones in certain job positions during layoffs or organizational restructuring.