Author Question: Marketable securities are purchased when excess cash is temporarily available and sold when cash is ... (Read 161 times)

gbarreiro · **on:** Jul 10, 2018

Marketable securities are purchased when excess cash is temporarily available and sold when cash
is needed.

Indicate whether the statement is true or false

Question 2

Your company is considering the replacement of an old delivery van with a new one that is more
efficient. The old van cost 40,000 when it was purchased 5 years ago.

The old van is being
depreciated using the simplified straight-line method over a useful life of 8 years. The old van
could be sold today for 7,000. The new van has an invoice price of 80,000, and it will cost 6,000
to modify the van to carry the company's products. Cost savings from use of the new van are
expected to be 28,000 per year for 5 years, at which time the van will be sold for its estimated
salvage value of 18,000. The new van will be depreciated using the simplified straight-line
method over its 5-year useful life. The company's tax rate is 35. Working capital is expected to
increase by 5,000 at the inception of the project, but this amount will be recaptured at the end of
year five. What is the incremental free cash flow for year one?
A) 24,220 B) 22,305 C) 18,875 D) 19,985

Jsherida · **Reply #1 on:** Jul 10, 2018

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