Question: A proposed three-year project will require $589,000 for fixed assets, $79,000 for inventory, and $43,000 for accounts receivable. Accounts payable are expected to increase by

A proposed three-year project will require $589,000 for fixed assets, $79,000 for inventory, and $43,000 for accounts receivable. Accounts payable are expected to increase by $47,000. The fixed assets will be depreciated straight-line to a zero book value over five years. No bonus depreciation will be taken. At the end of the project, the fixed assets can be sold for $225,000. The net working capital returns to its original level at the end of the project. The operating cash flow per year is $67,800. The tax rate is 21 percent and the discount rate is 12 percent. What is the total cash flow in the final year of the project?

A. $364,190
B. $378,970
C. $369,126
D. $361,000
E. $370,126

A project requires $428,000 of equipment that is classified as seven-year property. What is the depreciation expense in Year 2 given the following MACRS depreciation allowances, starting with Year 1: 14.29, 24.49, 17.49, 12.49, 8.92, 8.92, 8.93, and 4.46 percent?

A. $53,457.20
B. $74,857.20
C. $104,817.20
D. $89,038.42
E. $61,161.20

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