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Company Q is considering a project which needs an equipment. The cost of the equipment is $350,000. This equipment will be depreciated for five years on a straight-line basis to zero-salvage value. The market value of the equipment at the end of the fifth year is $25,000. Initial investment in working capital is $22,000. Annual sales and operating costs (excluding depreciation) from this project are $175,000 and 93,000 respectively. Company pays tax at 40%.  The annual operating cashflow from the project is         A. $75200                                                        B. $64000                                                        C. $62000                                                        D. $77200

Company Q is considering a project which needs an equipment. The cost of the equipment is $350,000. This equipment will be depreciated for five years on a straight-line basis to zero-salvage value. The market value of the equipment at the end of the fifth year is $25,000. Initial investment in working capital is $22,000. Annual sales and operating costs (excluding depreciation) from this project are $175,000 and 93,000 respectively. Company pays tax at 40%.  The annual operating cashflow from the project is         A. $75200                                                        B. $64000                                                        C. $62000                                                        D. $77200

Essentials Of Investments
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
Section: Chapter Questions
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Company Q is considering a project which needs an equipment. The cost of the equipment is $350,000. This equipment will be depreciated for five years on a straight-line basis to zero-salvage value. The market value of the equipment at the end of the fifth year is $25,000. Initial investment in working capital is $22,000. Annual sales and operating costs (excluding depreciation) from this project are $175,000 and 93,000 respectively. Company pays tax at 40%. 

The annual operating cashflow from the project is        

A. $75200                                                        B. $64000                                                        C. $62000                                                        D. $77200

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