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question 88

Multiple Choice

Use the information for the question(s) below.
The Sisyphean Corporation is considering investing in a new cane manufacturing machine that has an estimated life of three years. The cost of the machine is $30 000 and the machine will be depreciated by the straight-line method over its three-year life to a residual value of $0.
The cane manufacturing machine will result in sales of 2 000 canes in year 1. Sales are estimated to grow by 10% per year for each of the three years. The price per cane that Sisyphean will charge its customers is $18 each and is to remain constant. The canes have a cost per unit to manufacture of $9 each.
Installation of the machine and the resulting increase in manufacturing capacity will require an increase in various net working capital accounts. It is estimated that the Sisyphean Corporation needs to hold 2% of its annual sales in cash, 4% of its annual sales in accounts receivable, 9% of its annual sales in inventory, and 5% of its annual sales in accounts payable. The firm is in the 30% tax bracket and has a cost of capital of 10%.
-Which of the following adjustments should NOT be made when computing free cash flow from incremental earnings?

Definitions:

Dependent Variable

In research, it's the outcome of interest which researchers investigate how it's affected by one or more independent variables.

Male-centered Perspective

A viewpoint in research or analysis that prioritizes male experiences or positions, often at the expense of understanding female perspectives.

Control Group

In experimental research, a group of subjects that does not receive the treatment or intervention being tested, serving as a benchmark to measure the effects of the treatment on the experimental group.

Reliability

The consistency and stability of a measurement, test, or instrument over time, ensuring that repeated applications yield similar results.