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

question 78

Multiple Choice

FAR Corporation
FAR Corporation is considering a new project to manufacture widgets. The cost of the manufacturing equipment is $150,000. The cost of shipping and installation is an additional $15,000. 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 $300,000 per year. Cost of goods sold will be 80% of sales. The project will require an increase in net working capital of $15,000. At the end of three years, FAR plans on ending the project and selling the manufacturing equipment for $35,000. The marginal tax rate is 40% and FAR Corporation's appropriate discount rate is 12%.
-Refer to FAR Corporation.What is the initial investment outlay for this project?

• A) $10,000
• B) $135,000
• C) $145,000
• D) $165,000

---

Definitions:

World Trade Organization

An international institution that regulates and facilitates global trade between nations, aiming to ensure smooth, free, and predictable trading.

United Nations

An international organization founded in 1945 to promote global peace, security, and cooperation among its member countries.

Local Economy Dominance

The significant influence or control of a particular area's economy by one or more entities.

Technology Transfer

The process of sharing or distributing technology between different organizations, or from research institutions to industry, facilitating innovation and application.