Jefferson Industries is considering an expansion. The necessary equipment would be purchased for $7 million and will be fully depreciated at the time of purchase. The expansion would also require an additional $2 million investment in working capital. The tax rate is 35 percent. Last year, the company spent and expensed $400,000 on research related to the project. The company plans to house the project in an unused building it owns. If the building were sold, it would net $1 million after taxes and real estate commissions. What is the initial investment outlay for this project after bonus depreciation is considered? O a. $6.6 million O b. $10.0 million O c. $7.6 million O d. $9.4 million O e. $10.4 million QUESTION 2 Hoover Publishing is trying to estimate the Year 1 operating cash flow for a proposed project. The assets required for the project were fully depreciated at the time of purchase. The financial staff has collected the following information: Sales revenues Operating costs Interest expense $8.3 million 4.6 million 1.2 million Hoover has also determined that this project would cannibalize one of its other projects by $1.6 million of cash flow (before taxes) per year. The firm has a 25 percent tax rate, and its WACC is 10 percent. Calculate the project's operating cash flow for Year 1. O a. $1,575,000 O b. $675,000 O c. $25,000 O d. $2,775,000 O e. $1,875,000 QUESTION 3 Garfield Manufacturing is now in the final year of a project. The equipment originally cost $20 million, of which 100 percent has been depreciated. Garfield can sell the used equipment today for $1.1 million, and its tax rate is 30 percent. What is the equipment's after-tax net salvage value? O a. $1,430,000 O b. $330,000 O c. $6.770,000 O d. $1,130,000 O e. $770,000