In the Fourth and Final Year of a Project, SVC

question 36

Multiple Choice

In the fourth and final year of a project, SVC expects operating cash flow of $440,000. The project required an $80,000 investment in working capital at the beginning. Of that amount, $60,000 will be recovered in year 4. Machinery associated with the project will be sold for exactly its undepreciated value of $15,000. Total free cash flow for the fourth year is

• A) $75,000.
• B) $1,500,000.
• C) $515,000.
• D) $535,000.

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Definitions:

Marginal Cost

The increment in expense for generating an additional unit of a product or service.

Swords

Edged weapons, longer than a knife or dagger, used historically in warfare or personal combat for cutting or thrusting.

Total Variable Cost

The sum of all costs that vary with output level in the production of goods or services, including materials and labor.

Total Variable Costs

The sum of all costs that vary with the level of output, including expenses such as materials and direct labor.