1. A project will increase sales by $60,000 and cash expenses by $41,000. The project will cost $40,000 and be depreciated using straight-line depreciation to a zero book value over the 4-year life of the project. The company has a marginal tax rate of 35 percent. What is the operating cash flow of the project using the tax shield approach?
a. $12,350
b. $8,650
c. $15,850
d. $13,150
e. $10,350
2. Assume an asset cost $41,500 and has a current book value of $23,200. The asset is sold today for $19,900 cash. The firm's tax rate is 34 percent. As a result of this sale, the firm's net cash flow:
a. will increase by exactly $19,900.
b. will decrease by the difference between the $23,200 and the $19,900.
c. will increase by more than $19,900.
d. will increase by less than $19,900.
e. will decrease by some amount.