Use the following information to answer the next three questions:

You are evaluating a project for The Dogs, that involves the purchase of a new dog biscuit making machine. The project has a three year life and you estimate the project will increase revenues by $181,000 and will increase costs by $22,000 each year. The project requires an initial investment of $120,000 which is depreciated on a straight-line basis to zero over the 3 year project life. The machine will be sold at the end of the project for $35,000. The initial net working capital investment required for this project is $14,000 which will be recovered at the end of the projects life. The tax rate is 25% and the required return on the project is 10%.

What is the intial cash outflow for this project?

Multiple Choice

-104,000

-$134,000

-$106,000

-$90,000

You are evaluating a project for The Dogs, that involves the purchase of a new dog biscuit making machine. The project has a three year life and you estimate the project will increase revenues by $181,000 and will increase costs by $22,000 each year. The project requires an initial investment of $120,000 which is depreciated on a straight-line basis to zero over the 3 year project life. The machine will be sold at the end of the project for $35,000. The initial net working capital investment required for this project is $14,000 which will be recovered at the end of the projects life. The tax rate is 25% and the required return on the project is 10%.

What is the total cash flow for the project in year 3?

Multiple Choice

$155,500

$169,500

$143,250

$129,250

You are evaluating a project for The Dogs, that involves the purchase of a new dog biscuit making machine. The project has a three year life and you estimate the project will increase revenues by $181,000 and will increase costs by $22,000 each year. The project requires an initial investment of $120,000 which is depreciated on a straight-line basis to zero over the 3 year project life. The machine will be sold at the end of the project for $35,000. The initial net working capital investment required for this project is $14,000 which will be recovered at the end of the projects life. The tax rate is 25% and the required return on the project is 10%.

What is the annual cash flow associated with the depreciation tax shield for this project?

Multiple Choice

$14,000

$53,333

$40,000