Question

chapter8IF 8TF chapter 8 IF Question 3 0/ 1 pts The Sisyphean Corporation is considering investing in a new cane manufacturing machine with a cost of $30,000. It is to be depreciated in a continuing pool with a CCA rate of 50 percent. The machine has no resale value and will produce sales of 2,000 in year I. Sales are estimated to grow by 10% per year each year through year three. The price per cane that Sisyphean will charge its customers is $18 each and is to remain constant. The canes have a cost per unit to manufacture of $9 each. Installation of the machine and the resulting increase in manufacturing capacity will require an increase in various net working capital accounts. It is estimated that the Sisyphean Corporation needs to hold 2% of its annual sales in cash, 4% of its annual sales in accounts receivable, 9% of its annual sales in inventory, and 5% of its annual sales in accounts payable. The firm is in the 35% tax bracket and has a cost of capital of 10%. The present value of the CCA tax shield for the Sisyphean Corporation's project is closest to: You Answered $5,250 $8,750 Correct Answer O $8,352 $7,955

Answer 1

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