TAR Corps

TAR Corps is considering a new project to manufacture widgets. The cost of the manufacturing equipment is $300,000. The cost of shipping and installation is an additional $30,000. The asset will fall into the 3-year MACRS class. The year 1-4 MACRS percentages are 33.33%, 44.45%, 14.81%, and 7.41%, respectively. Sales are expected to be $600,000 per year. Cost of goods sold will be 80% of sales. The project will require an increase in net working capital of $30,000. At the end of three years, TAR plans on ending the project and selling the manufacturing equipment for $70,000. The marginal tax rate is 40% and TAR Corps appropriate discount rate is 12%.

3. Refer to TAR Corps. What is the initial investment outlay for this project?

a.	$20,000
b.	$270,000
c.	$330,000
d.	$365,000

4. Refer to FAR Corporation. What is the depreciation expense in year 1?

a.	$49,995
b.	$99,990
c.	$33,345
d.	$66,675