1) . TR Industries manage a product with a 2.6 degree of operating leverage. Sales of the product are expected to decline by 8 percent next year as an economic downturn is anticipated. What is the expected change in the operating cash flow for this product for next year?

A. -20.8 percent

B. -5.4 percent

C. 5.4 percent

D. 10.8 percent

E. 20.8 percent

2.

KLS, Inc. is considering a four-year project that requires the purchase of $2,435,700

worth of equipment. The equipment is in a 30% CCA class. The company will incur $112,500

in annual interest and taxes at the 34% marginal rate for this project. Sales are estimated at

$1.5 million a year with costs averaging $939,500 annually over the life of the project. What

is the operating cash flow in year 4 of the project?

A. $399,114

B. $473,364

C. $473,406

D. $511,656

E. $624,114

NOTE - Please elaborate 2nd question!