Morage Corp

question 137

Multiple Choice

Morage Corp. is replacing an entire baking line that was purchased for $420,000 and currently has a book value of $60,000. The new, more efficient line, will cost $940,000 installed and can be depreciated as a 7-year MACRS asset. With the increased efficiency, Morage expects annual revenues to increase by $425,000, and operating expenses to increase by $170,000. The older machine, which was being depreciated at the straight-line rate of $20,000/year, will be sold for $30,000. What are the net cash flows for year 2? Assume the firm's marginal tax rate is 40% and that the year 2 depreciation rate is 24.49% under MACRS.

• A)$26,996
• B)$332,206
• C)$237,082
• D)$383,206

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Definitions:

Pique Technique

A persuasion technique that aims to capture one's attention by making an unusual request or statement.

Need for Cognition

The motivation to engage and enjoy thinking deeply about information and problems.

Strong Arguments

Persuasive arguments that are logical, well-supported, and convincing.

Weak Arguments

Arguments that lack solid reasoning, evidence, or both, often failing to convincingly support the stated claim.