Use the Information for the Question(s)below

question 9

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 straight line over its three-year life to a residual value of $0.
The cane manufacturing machine will result in sales of 2000 canes in year 1.Sales are estimated to grow by 10% per year each year through year three.The price per cane that Sisyphean will charge its customers is $18 each and is to remain constant.The canes have a manufacturing cost 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 6% of its annual sales in accounts payable.The firm is in the 21% tax bracket,and has a cost of capital of 10%.
-The incremental EBIT in the first year for the Sisyphean Corporation's project is closest to:

• A)$18,000.
• B)$8000.
• C)$11,700.
• D)$5200.

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Definitions:

Sublingual Salivary Gland

One of the major salivary glands located under the tongue, responsible for secreting saliva to facilitate digestion and oral health.

Dental Caries

Tooth decay caused by bacterial infection that leads to demineralization and destruction of the hard tissues of the teeth.

Pulp Cavity

The central part of a tooth containing connective tissue, blood vessels, and nerves.

Dentin

Bony material forming the mass of the tooth.