Niwot IncIs Considering an Investment That Will Generate $600,000 in Revenues

question 40

Multiple Choice

Niwot Inc.is considering an investment that will generate $600,000 in revenues per year for 7 years and has $360,000 of cash expenses for the same period (before income taxes) .The cost of the asset is $420,000 and it will be depreciated using straight-line depreciation over the 7 year life.The asset has no salvage value.Niwot's tax rate is 30%.The cost of capital is 9%.
What is the annual after-tax cash flow associated with this investment?

• A)$240,000
• B)$186,000
• C)$126,000
• D)$150,000
• E)None of the answer choices is correct.

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Definitions:

Participative Management

A management style where employees at all levels are encouraged to contribute ideas towards identifying and solving problems, making decisions, and improving productivity.

Empowerment

The process by which managers help others to acquire and use the power needed to make decisions affecting themselves and their work.

Coordination

The process of organizing activities and resources efficiently and effectively to achieve defined goals and objectives within an organization.

Direct Contact

The immediate, face-to-face interaction or communication between individuals, without the use of intermediaries or technology.