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

question 75

Multiple Choice

(Appendix 8C) Stack Corporation is considering a capital budgeting project that would require investing $80, 000 in equipment with an expected life of 4 years and zero salvage value.Annual incremental sales would be $200, 000 and annual incremental cash operating expenses would be $150, 000.The project would also require a one-time renovation cost of $10, 000 in year 3.The company's income tax rate is 35% and its after-tax discount rate is 7%.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)$50, 000
• B)$33, 000
• C)$30, 000
• D)$39, 500

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Definitions:

Stakeholders

Individuals or groups that have an interest, concern, or stake in an organization, project, or outcome and can affect or be affected by its actions.

Work-Related State

Refers to the condition or situation that pertains directly to the work environment or job tasks.

Psychological Capital

An individual's positive psychological state, characterized by self-efficacy, optimism, hope, and resilience, which can affect their work attitude and performance.

Older Canadians

A demographic group in Canada comprised of individuals typically aged 65 and over.