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:

Positive Reinforcement

In behaviorism, a method of increasing the likelihood of a behavior by following it with a desirable event or outcome.

Negative Reinforcement

A method in behavior psychology that strengthens a behavior by removing an unpleasant stimulus when the behavior occurs.

Increases

Refers to a situation or condition becoming larger, greater, or more in number; often associated with growth or expansion in various contexts.

Decreases

Refers to a reduction in quantity, size, rate, or level of something, often measured in various contexts such as economics, science, and health.