The following information relates to the next three problems:

Your company is considering a machine which will cost $50,000 at Time 0 and which can be sold after 3 years for $10,000. $12,000 must be invested at Time 0 in inventories and receivables; these funds will be recovered when the operation is closed at the end of Year 3. The facility will produce sales revenues of $50,000/year for 3 years; variable operating costs (excluding depreciation) will be 40 percent of sales. No fixed costs will be incurred. Operating cash inflows will begin 1 year from today. By an act of Congress, the machine will have depreciation expenses of $40,000, $5,000, and $5,000 in Years 1, 2, and 3 respectively. The company has a 40 percent tax rate, enough taxable income from other assets to enable it to get a tax refund on this project if the project's income is negative, and a 15 percent cost of capital. Inflation is zero.

18. What is the depreciation tax shield dollar amount for the second operating year?

a. $ 5,000

b. $ 2,000

c. $ 3,000

d. $13,333

e. $ 5,333

19. Whats the companys operating cash flow for year one?

a. $ 50,000

B. $ 34,000

c. $-10,000

d. $ - 6,000

e. None of the above

20. Whats the firms total net cash flow for the projects final year that would be used in determining the projects NPV?

a. $ 7,673.71

b. $15,000

c. $18,000

d. $20,000

e. $38,000