Question: Please answer questions 1-7 based on the following information: .You have been asked by the president of your company to evaluate the proposed The trucks

Please answer questions 1-7 based on the following information: .You have been asked by the president of your company to evaluate the proposed The trucks basic price is $50,000, and it will cost another $10,000 to modify it for special The truck falls in the MACRS 3-year class, and it will be sold after three years for $20,000. . Use of the truck will require an increase in net operating working capital (spare parts acquisition of a new special-purpose truck. use by your firm. The applicable depreciation rates are 33%, 45%, 15%, and 7%. inventory) of $2,000. The truck will have no effect on revenues, but it is expected to save th firm $20,000 per year in before-tax operating costs, mainly labor. The firm's marginal tax rate is 40%. 1. What is CFFA at year 0? a. -$62,000 b. -$65,010 c. $47,000 d. -$50,000 2. What is depreciation at year 2? a. $9,000 b. $19,800 c. $27,000 d. $4,200 3. What is CFFA at year 2? a. $10,000 b. $74,000 C. $35,000 d. $22,800 4. What is deprecation tax shield benefit at year 1? a. $19,800 b. $ 7,920 c. $30,000 d. $10,800 5. What is after-tax cost saving at year 1? a. $20,000 b. $15,600 c. $12,000 d. 8,000 6. What is the tax on salvage value? a. $8,000 b. $6,320 c. $3,000 d. $5,000 7. What is CFFA at year 3? a. $15.680 b. $22,800 c. $31,280 d. $15,600

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