A Project Is Expected to Decrease a Firm's Cash Expenses

question 16

Multiple Choice

A project is expected to decrease a firm's cash expenses by $40,000 annually, and increase its depreciation by $25,000 annually. Given this information, what is the project's expected annual net cash flow? Use a 40% effective tax rate.

• A)$31,000
• B)$9,000
• C)$16,000
• D)$34,000

---

Definitions:

Consumer Expenditure

The total amount spent by consumers on goods and services in a given period.

Total Revenue

The overall amount of money generated from the sale of goods and services before any expenses are subtracted.

Inelastic

Describes a situation where the quantity demanded or supplied changes by a smaller percentage than the percentage change in price.

Total Revenue

is the total amount of money received by a company from its sales of goods or services, before any expenses are subtracted.