A Firm Is Considering Taking a Project That Will Produce

question 71

Multiple Choice

A firm 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. The project would also reduce the cash revenues of an existing project by $2 million. What is the free cash flow on the project, per year, if the firm 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:

Monozygotic Twins

Twins that develop from a single fertilized egg, sharing nearly 100% of their genetic material.

Dizygotic Twins

Also known as fraternal twins, these are siblings born during the same pregnancy who have developed from two separate eggs fertilized by two different sperm.

Biological Parents

The parent(s) who contribute their genes to their offspring through reproduction.

Chromosomes

Structures within cells that contain DNA and carry genetic information necessary for cell growth, division, and function.