Maria Bakery is considering a 3-year project with an initial cost of $93,000. The project will...

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Maria Bakery is considering a 3-year project with an initialcost of $93,000. The project will not directly produce any salesbut will reduce operating costs by $31,000 a year. The equipment isclassified as MACRS 7-year property. The MACRS table values are.1429, .2449, .1749, .1249, .0893, .0892, .0893, and .0446 forYears 1 to 8, respectively. At the end of the project, theequipment will be sold for an estimated $43,270. The tax rate is 34percent and the required return is 10 percent. An extra $12,000 ofinventory will be required for the life of the project. What is thetotal cash flow for Year 3?
$72,360.75
$80,375.96
$91,599.44
$96,848.84
$102,219.50

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4.4 Ratings (609 Votes)

Answer is 8037596 Cost of Equipment 93000 Depreciation Year 1 01429 93000 Depreciation Year 1 1328970 Depreciation Year 2 02449 93000 Depreciation Year 2 2277570 Depreciation Year 3 See Answer

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Maria Bakery is considering a 3-year project with an initialcost of $93,000. The project will not directly produce any salesbut will reduce operating costs by $31,000 a year. The equipment isclassified as MACRS 7-year property. The MACRS table values are.1429, .2449, .1749, .1249, .0893, .0892, .0893, and .0446 forYears 1 to 8, respectively. At the end of the project, theequipment will be sold for an estimated $43,270. The tax rate is 34percent and the required return is 10 percent. An extra $12,000 ofinventory will be required for the life of the project. What is thetotal cash flow for Year 3?$72,360.75$80,375.96$91,599.44$96,848.84$102,219.50