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Cowboy Bobs Boots (CBB) is purchasing new boot making equipment for $20,000. This purchase results in a $2,250 increase in inventory along with a $5,000
Cowboy Bobs Boots (CBB) is purchasing new boot making equipment for $20,000. This purchase results in a $2,250 increase in inventory along with a $5,000 increase in accounts payable. Depreciation for tax purposes is $5,000 per year, and book value is zero at the end of 4 years. For the 4 years of the projects life, CBB expects the new equipment to increase before-tax annual revenues and operating expenses by $12,000 and $6,000, respectively. CBBs tax rate is 34 percent. The annual operating cash flow expected from the new boot making equipment is ______________. (Note: it is the same amount each year) Select the range that includes the correct answer.
A. less than $5,000
B. is greater than or equal to $5,000, but less than $6,000.
C. is greater than or equal to $6,000, but less than $7,000.
D. is greater than or equal to $7,000, but less than $8,000.
E. is greater than or equal to $8,000.
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