(Appendix 8C)Folino Corporation Is Considering a Capital Budgeting Project That

question 9

Multiple Choice

(Appendix 8C) Folino Corporation is considering a capital budgeting project that would require investing $120, 000 in equipment with an expected life of 4 years and zero salvage value.Annual incremental sales would be $380, 000 and annual incremental cash operating expenses would be $300, 000.The project would also require an immediate investment in working capital of $10, 000 which would be released for use elsewhere at the end of the project.The project would also require a one-time renovation cost of $30, 000 in year 3.The company's income tax rate is 35% and its after-tax discount rate is 15%.The company uses straight-line depreciation.Assume cash flows occur at the end of the year except for the initial investments.The company takes income taxes into account in its capital budgeting. The total cash flow net of income taxes in year 2 is:

• A)$62, 500
• B)$80, 000
• C)$43, 000
• D)$50, 000

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Definitions:

Labeled

Marked with a tag or identifier for purposes of identification or to track a substance in an experiment.

Homoplastic Features

Traits shared by different species due to convergent evolution, not because of a common ancestry.

Correctly Matches

Properly aligns or associates two or more elements based on a set of rules or criteria.

Natural Selection

A mechanism of evolution posited by Charles Darwin, where organisms better adapted to their environment tend to survive and produce more offspring.