d. Allison\'s annuity has a higher present value than Ted\'s o e. Ted\'s annuity

Question

d. Allison's annuity has a higher present value than Ted's o e. Ted's annuity is an ordinary annuity QUESTION 32 3 points Save Answer Kathy's Kabinets is looking at a project that will require $120,000 in fixed assets and another $20,000 in net working capital. The project is expected to produce sales of $154.000 with associated costs of $91,000 The project has a 4-year life. The company uses straight-line depreciation to a zero book value over the life of the project. The tax rate is 35% w/fat is the operating cash flow for this project? a. $51.450 b $68,640 C. $44,300 o d. $43,600 o e. $55,820 QUESTION 33 3 points Save Answer Utimately, what do the owners of a firm want trom the frm? nroduced by the firm's

Explanation / Answer

Depreciation per year=(120,000/4)=$30,000/year

Hence OCF=(Sales-Costs)(1-tax rate)+Tax savings on Depreciation

=(154000-91000)(1-0.35)+(0.35*30,000)

which is equal to

=$51450(A)

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