A project will increase sales by $60,000 and cash expenses by $51,000. The project will cost $40,000 and will be depreciated using straight- line depreciation to a zero book value over the

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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A project will increase sales by $60,000 and
cash expenses by $51,000. The project will cost
$40,000 and will be depreciated using straight-
line depreciation to a zero book value over the
4-year life of the project. The company has a
marginal tax rate of 35%. What is the operating
cash flow of the project using the tax shield
approach?
O $9,350
O $9,700
O $8,650
O $5,850
Transcribed Image Text:A project will increase sales by $60,000 and cash expenses by $51,000. The project will cost $40,000 and will be depreciated using straight- line depreciation to a zero book value over the 4-year life of the project. The company has a marginal tax rate of 35%. What is the operating cash flow of the project using the tax shield approach? O $9,350 O $9,700 O $8,650 O $5,850
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