Use the Following Information for Questions 8-A Through 8-C

question 10

Essay

Use the following information for questions 8-a through 8-c. You have been asked to evaluate the purchase of a new machine for your company. It will cost $60,000, and it falls into the MACRS 3-year class (Yr. 1 - 33.3%; Yr. 2 - 44.4%; Yr. 3 - 14.8%; Yr. 4 - 7.5%). The purchase will require a $6,000 increase in repair parts inventory. Parts are expensed for tax purposes at the time they are acquired. The machine will replace one $25,000/year operator. It is expected to last for four years when it can be sold including any spare parts still on hand for $5,000. The tax rate is 40% and your company's cost of capital is 12%.
a. What is the initial outlay for this project?
a. $46,000
b. $48,000
c. $54,000
d. $60,000
e. $66,000

b. What is the (operating) cash flow in Year 2?
a. $10,656
b. $15,000
c. $25,656
d. $26,640
e. $41,640

c. What is the cash flow in year 4?
a. $30,000
b. $18,000
c. $17,000
d. $19,800
e. $11,000

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Definitions:

Interpersonal Functioning

Refers to the way an individual interacts with others, including their ability to communicate, empathize, and establish relationships.

Therapeutic Goal

The desired outcome or objective aimed to be achieved through therapeutic intervention, often established collaboratively between the therapist and the client.

Onset of Disorder

The point in time or period in which symptoms of a psychiatric or medical disorder first appear or significantly worsen.

Interpersonal Therapy

A form of psychotherapy that focuses on improving interpersonal relationships and communication patterns as a way to alleviate symptoms of mental illness.