Fitzgerald Computers Is Considering a New Project Whose Data Are

question 13

Multiple Choice

Fitzgerald Computers is considering a new project whose data are shown below. The required equipment has a 3-year tax life, after which it will be worthless, and it will be depreciated by the straight-line method over 3 years. Revenues and other operating costs are expected to be constant over the project's 3-year life. What is the project's Year 1 cash flow?
$\begin{array} { l r } \text { Equpment cost (depreciable basis) } & \text { \$65,000 } \\\text { Staight-line depreciation rate } & 33.333 \% \\\text { Sales revenue5, each year } & \text { \$60,000 } \\\text { Operating casts (excl. deprec.) } & 35,000 \\\text { Ter rate } & 35.0 \%\end{array}$

• A) $28,115
• B) $28,836
• C) $29,575
• D) $30,333
• E) $31,092

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Definitions:

Productivity

The measure of outputs according to the inputs needed to produce them; a way to determine the efficiency of a business.

Production

Production refers to the processes and methods used to transform tangible inputs (raw materials, semi-finished goods) and intangible inputs (ideas, information) into goods or services.

Quality Control

The process of inspecting products or services to ensure they meet the required standards of quality before being offered to consumers.

Finished Product

A finished product is a fully manufactured item ready for sale or use, having gone through all stages of production.