You Have Been Asked by the President of Your Company

question 35

Multiple Choice

You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck for $50,000. The truck falls into the MACRS three-year class, and it will be sold after three years for $5,000. Use of the truck will require an increase in NWC (spare parts inventory) of $2,000. The truck will have no effect on revenues, but it is expected to save the firm $25,000 per year in before-tax operating costs, mainly labor. The firm's marginal tax rate is 40 percent. What will the operating cash flow for this project be during year 2?

• A)$21,890
• B)$22,225
• C)$22,690
• D)$23,890

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Definitions:

Pre-mRNA

is the initial form of mRNA produced by transcription in eukaryotic cells before undergoing modification to become mature mRNA.

Protein

Protein is a macromolecule composed of amino acids, essential for the structure, function, and regulation of the body's cells, tissues, and organs.

Pre-mRNA

The primary transcript formed during gene expression in eukaryotes, which undergoes processing to become mature mRNA.

Introns

Non-coding sequences of DNA within a gene that are removed during RNA processing before translation.