A Firm Is Considering a New Project That Will Generate

question 31

Multiple Choice

A firm is considering a new project that will generate cash revenue of $1,000,000 and cash expenses of $700,000 per year for five years.The equipment necessary for the project will cost $200,000 and will fall under asset class 43 with a CCA rate of 30%.What is the expected free cash flow in the second year of the project if the firm's marginal tax rate is 35%?

• A)$195,000
• B)$162,500
• C)$212,850
• D)$245,000
• E)$161,850

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Definitions:

Rubber Gasket

A mechanical seal that fills the space between two or more mating surfaces, generally to prevent leakage from or into the joined objects while under compression.

Pneumatic Wrench

A tool powered by compressed air used for tightening or loosening nuts and bolts with high torque.

Normal Time

The amount of time that should be required to complete a task under normal working conditions, without any delays.

Standard Time

A set duration established for performing a specific task, used for planning and efficiency purposes.