Use the Information Below to Answer the Following Questions Depreciation Has Been Calculated on a Straightline Basis

question 62

Multiple Choice

Use the information below to answer the following questions.
Y3 Ltd is expanding its production of binoculars. The plant is expected to cost $750,000, have a life of 5 years, and a nil residual value. It will be ready for operation on 31 December 2017. The following statement of comprehensive income figures for the new binoculars are forecast: $\begin{array}{llllll}&2018 & 2019 & 2020 & 2021 & 2022 \\&\$ \mathrm{~m} & \$ \mathrm{~m} & \$ \mathrm{~m} & \$ \mathrm{~m} & \$ \mathrm{~m}\\\text { Sales } & 1.5 & 1.3 & 1.4 & 1.2 & 1.1 \\\text { Costs (including depreciation) } & 1.0 & 1.0 & 1.0 & 1.0 & 1.0 \\\hline \text { Profit before tax } & \underline{0.5} & 0.3 & 0.4 & 0.2 & 0.1\end{array}$ Depreciation has been calculated on a straightline basis. You should assume that all cash flows occur at the end of the year in which they arise. The company's cost of capital is 10%. Ignore taxation.
-Refer to the table above. The annual cash outflow for the project is:

• A)$700,000.
• B)$850,000.
• C)$750,000.
• D)$650,000.

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Definitions:

Historical Data

Past information and data used to analyze trends, forecast future events, and make informed decisions.

Highly Variable

Characterized by large changes or fluctuations, often unpredictably.

Managerial Decisions

Decisions made by managers within organizations that affect the allocation of resources and the direction of operational activities.

Collaborative Forecasting

A process where multiple stakeholders work together to predict future demands, improving supply chain efficiency.