A.

The current accounts of a firm are listed below, as they are now and as they are expected to be should a new project be accepted. What amount should be included in the incremental cash flows of the project for net working capital?

Account

Current value

Projected value

Accounts receivable

$

218,500

$

292,000

Accounts payable

$

189,000

$

231,500

Inventory

$

321,000

$

367,500

B.

An asset costs $41,000 and is classified as 3-year MACRS property. What is the depreciation expense in year 2?

Year

Three-Year Property Class

1

33.33

%

2

44.45

3

14.81

4

7.41

C.

A project required an initial cash outlay for equipment of $68,000 The equipment was classified as 5-year MACRS property. What is the book value of that equipment at the end of year 4?

Year	Five-Year Property Class
1	20.00	%
2	32.00
3	19.20
4	11.52
5	11.52
6	5.76