In a Discounted Cash Flow Analysis of Giant Corp

question 1

Multiple Choice

In a discounted cash flow analysis of Giant Corp.'s project described in the problem above,what would be the projected Year 2 free cash flow?

• A) $1,300
• B) $1,450
• C) $1,700
• D) $1,750

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Definitions:

Fixed Product Cost

Costs associated with a product that do not vary with the level of output, such as rent, depreciation, and salaries of permanent staff.

Materials Purchased

The total cost or quantity of raw materials bought by a company for use in production processes.

Raw Materials Inventory

Raw materials inventory refers to the stock of raw materials on hand at any given time that are made available for use in the production process.

Fixed Costs

Expenses that do not change in total with changes in the level of production or sales, such as rent, salaries, and insurance.