Use the Information for the Question(s)below

question 39

Multiple Choice

Use the information for the question(s) below.
Epiphany Industries is considering a new capital budgeting project that will last for three years. Epiphany plans on using a cost of capital of 12% to evaluate this project. Based on extensive research, it has prepared the following incremental cash flow projects:

-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 be depreciated using the straight-line method over four years. What is the expected free cash flow in the second year of the project if the firm's marginal tax rate is 30%?

• A)$225 000
• B)$245 000
• C)$195 000
• D)$162 500

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Definitions:

Phloem

The vascular tissue in plants responsible for the transport of nutrients, particularly sugar, throughout the plant.

Bark

External part of a tree, containing cork, cork cambium, and phloem.

Casparian Strip

A band of cell wall material found in plant roots that helps control the movement of water and nutrients between the soil and the vascular system.

Suberin

A waxy hydrophobic substance found in the cell walls of plants, acting as a barrier to water and solute movement.