A Company Is Considering Taking a Project That Will Produce

question 37

Multiple Choice

A company is considering taking a project that will produce $12 million of revenue per year. Cash expenses will be $5 million, and depreciation expenses will be $1 million per year. If the company takes that project, then it will reduce the cash revenues of an existing project by $2 million. What is the free cash flow on the project, per year, if the company is in the 40 percent marginal tax rate?

• A) $2.4 million
• B) $3.4 million
• C) $4.6 million
• D) $5.0 million

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Definitions:

Bacterial Pneumonia

A type of pneumonia caused by bacterial infection, characterized by inflammation of the air sacs in one or both lungs.

Air Conditioning

A system designed to control the temperature, humidity, and purity of the air in an enclosed space, providing comfort or preserving goods.

COPD

Chronic Obstructive Pulmonary Disease, a group of lung conditions that cause breathing difficulties, including emphysema and chronic bronchitis.

Alveoli

Small air bladders within the lungs that facilitate the swap between oxygen and carbon dioxide.