question archive TAR Corps TAR Corps is considering a new project to manufacture widgets
TAR Corps TAR Corps is considering a new project to manufacture widgets
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TAR Corps
TAR Corps is considering a new project to manufacture widgets. The cost of the manufacturing equipment is $300,000. The cost of shipping and installation is an additional $30,000. The asset will fall into the 3-year MACRS class. The year 1-4 MACRS percentages are 33.33%, 44.45%, 14.81%, and 7.41%, respectively. Sales are expected to be $600,000 per year. Cost of goods sold will be 80% of sales. The project will require an increase in net working capital of $30,000. At the end of three years, TAR plans on ending the project and selling the manufacturing equipment for $70,000. The marginal tax rate is 40% and TAR Corps’ appropriate discount rate is 12%.
3. Refer to TAR Corps. What is the initial investment outlay for this project?
|
a. |
$20,000 |
|
b. |
$270,000 |
|
c. |
$330,000 |
|
d. |
$365,000 |
4. Refer to FAR Corporation. What is the depreciation expense in year 1?
|
a. |
$49,995 |
|
b. |
$99,990 |
|
c. |
$33,345 |
|
d. |
$66,675 |
