Regal Enterprises Is Considering the Purchase of a New Embroidering

question 120

Multiple Choice

Regal Enterprises is considering the purchase of a new embroidering machine. It is expected to generate additional sales of $400,000 per year. The machine will cost $295,000, plus $3,000 to install it. The embroiderer will save $12,000 in labor expense each year. Regal is in the 34% income tax bracket. The machine will be depreciated on a straight-line basis over five years (it has no salvage value) . The embroiderer will require annual operating expenses of $136,000. What is the annual operating cash flow that the machine will generate?

• A) $316,954
• B) $124,000
• C) $202,424
• D) $165,816

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Definitions:

Labor Force

The total number of employed and unemployed people.

Exerting Power

The act of implementing or applying force, authority, or influence over others to achieve a desired outcome.

Union Membership

The state of belonging to a labor union, which is an organization that represents the collective interests of workers in negotiations with employers regarding wages, working conditions, and benefits.

Strikes

A work stoppage caused by the mass refusal of employees to work, usually to protest employer policies, working conditions, or compensation.