A Firm Is Considering a New Project That Will Generate

Multiple Choice

A firm is considering a new project that will generate cash revenue of $1,000,000 and cash expenses of $700,000 per year for five years.The equipment necessary for the project will cost $200,000 and will fall under asset class 43 with a CCA rate of 30%.What is the expected free cash flow in the second year of the project if the firm's marginal tax rate is 35%?

A) $195,000
B) $162,500
C) $212,850
D) $245,000
E) $161,850