A Corporation Is Evaluating the Relevant Cash Flows for a Capital

Multiple Choice

A corporation is evaluating the relevant cash flows for a capital budgeting decision and mustestimate the terminal cash flow. The proposed machine will be disposed of at the end of its usablelife of five years at an estimated sale price of $2,000. The machine has an original purchase price of$80,000, installation cost of $20,000, and will be depreciated using a 20% CCA rate. The firm has a40 percent tax rate on ordinary income. The terminal cash flow is ____________. Assume the asset pool is closed at the end of the project.

A) $15,945.60
B) $5,887.20
C) $16,200.00
D) $17,801.10