DSSS Corporation DSSS Corporation Is Considering a New Project to Manufacture Widgets

question 72

Multiple Choice

DSSS Corporation
DSSS Corporation is considering a new project to manufacture widgets. The cost of the manufacturing equipment is $125,000. The cost of shipping and installation is an additional $10,000. The asset will fall into the 3-year MACRS class. The year 1- 4 MACRS percentages are 33.33%, 44.45%, 14.81%, and 7.41%, respectively. Sales are expected to be $225,000 per year. Cost of goods sold will be 60% of sales. The project will require an increase in net working capital of $10,000. At the end of three years, DSSS plans on ending the project and selling the manufacturing equipment for $25,000. The marginal tax rate is 40% and DSSS Corporation's appropriate discount rate is 15%.
-Refer to DSSS Corporation.What is the operating cash flow for year 3?

• A) $54,797
• B) $64,798
• C) $70,803
• D) $10,487

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Definitions:

Lintel

A horizontal beam used to span an opening.

Tympanum

The semi-circular or triangular decorative wall surface over an entrance, bounded by a lintel and arch, often containing sculptures or frescoes.

Vézelay

A historic village in France, known for the Basilica of Sainte-Marie-Madeleine, a masterpiece of Romanesque architecture and a UNESCO World Heritage Site.

South Portal

The term generally refers to the southern entrance of a cathedral or church, which often features significant architectural details and decorations.