The following schedule reflects the incremental costs and revenues for a capital project. The company uses the straight-line depreciation. The interest expense reflects an allocation of interest on the amount of this investment, based on the company's weighted average cost of capital.Revenues $650,000Direct costs$270,000 Variable overhead50,000 Fixed overhead20,000 Depreciation70,000 General & administrative40,000 Interest expense8,000 Total costs 458,000Net profit before taxes $192,000The annual cash flow from this investment, before tax considerations, would beSelect one:a. $200,000.b. $270,000.c. $192,000.d. $262,000.

Capital Budgeting: Capital budgeting decisions are the most important decision in corporate…

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FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The following schedule reflects the incremental costs and revenues for a capital project. The company uses the straight-line depreciation. The interest expense reflects an allocation of interest on the amount of this investment, based on the company's weighted average cost of capital.

Revenues		$650,000
Direct costs	$270,000
Variable overhead	50,000
Fixed overhead	20,000
Depreciation	70,000
General & administrative	40,000
Interest expense	8,000
Total costs		458,000
Net profit before taxes		$192,000

The annual cash flow from this investment, before tax considerations, would be

Select one:

a. $200,000.

b. $270,000.

c. $192,000.

d. $262,000.

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