Anderson Pipe is considering a new project whose data are shown below. The required equipment has a 3-year tax life, and the accelerated rates for such property are 33%, 45%, 15%, and 7% for Years 1 through 4. Revenues and other operating costs are expected to be constant over the project's 10-year expected operating life. What is the project's Year 3 cash flow?

Equipment cost (depreciable basis) $70,000 Sales revenues, each year $42,500 Operating costs (excl. deprec.) $25,000 Tax rate 35.0%

$11,814

$12,436

$13,090

$15,050

$16,432

Question 20

A company (financed only by debt and common stock) changes its capital structure from 20% Debt to Assets to 80% Debt to Assets. Which of the following scenarios is most likely?

Cost of Debt Increases, Cost of Equity Decreases, and WACC Decreases.

Cost of Debt Increases, Cost of Equity Decreases, and WACC Increases.

Cost of Debt Decreases, Cost of Equity Increases, and WACC Decreases.

Cost of Debt Decreases, Cost of Equity Decreases, and WACC Decreases.

Cost of Debt Increases, Cost of Equity Increases, and WACC Decreases.