The Sisyphean Corporation Is Considering Investing in a New Cane

question 86

Multiple Choice

The Sisyphean Corporation is considering investing in a new cane manufacturing machine that has an estimated life of three years. The cost of the machine is $30,000 and the machine will be depreciated straight line over its three-year life to a residual value of The cane manufacturing machine will result in sales of 2000 canes in year 1. Sales are estimated to grow by 10% per year each year through year 3. The price per cane that Sisyphean will charge its customers is
Each and is to remain constant. The canes have a cost per unit to manufacture of
Each.
Installation of the machine and the resulting increase in manufacturing capacity will require an increase in various net working capital accounts. It is estimated that the Sisyphean Corporation needs to hold 2% of its annual sales in cash, 4% of its annual sales in accounts receivable, 9% of its annual sales in inventory, and 5% of its annual sales in accounts payable. The firm is in the 35% tax bracket and has a cost of capital of 10%.
The depreciation tax shield for the Sisyphean Corporation's project in the first year is closest to ________.

• A) $10,500
• B) $3500
• C) $3150
• D) $2800

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Definitions:

Multicomponent Therapy

A therapeutic approach that integrates several different techniques and components to address multiple aspects of a disorder or issue.

Mediation Studies

Research focused on the examination of processes through which interventions or variables produce their effects, often used in conflict resolution and peace studies.

Systematic Desensitization

A behavioral therapy technique aimed at reducing anxiety through gradual exposure to the feared object or situation coupled with relaxation exercises.

Operant Conditioning

A learning process in which the likelihood of a behavior is increased or decreased through reinforcement or punishment.