Question 17 14 points Listen Kennesaw Corp. is analyzing the purchase of a cost saving equipment. The equipment is expected to reduce energy expenses by $370,000 before tax per year, and it is expected to have a salvage value of $95,000 after four-years. This equipment will be used for four-years and depreciated using the five-year MACRS using the rates in the below table. The equipment will cost $630,000 to purchase and will require an additional $70,000 for installation costs. In analyzing the feasibility of the investment, the CEO ordered a series of tests to determine whether the proposed equipment will realize the required costs savings or not for a total cost of $12,000. The cost of capital for this investment is estimated at 15% and the project is expected to increase net working capital by $55,000 at the beginning of the project. The marginal tax rate for this project is 35% 2 Year MACRS 3 1 20.00% 32.00% 19.20% 4 11.52% 5 11.52% 6 5.76% The operating cash flow in year 1 is: 1) $284,600 2) $289,500 O 3) $292,875 O4 $295,050 Question 18 (4 points) Kennesaw Corp. produces outdoors equipment including tents. Kennesaw Corp. previous sales for tents were 98,000 and for climbing equipment were 146,000. In the upcoming year, the CEO has decided to produce specialty sleeping bags also. As a consequence of this decision, the following year sales projections for tents are $101,000, for climbing equipment are $158,000, and for sleeping bags are $32,000. How much of next year's sales are derived from the side effects of adding the new product to its sales offerings? 1) -$2,000 2) $15.000 3) $17,000 4) $35.000