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

question 20

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 after-tax cash flow from selling the machine at the end of year 3?

• A) $25,000
• B) $5,999
• C) $7,214
• D) $19,001