2D1B THE FOLLOWING SCHEDULE REFLECTS THE INCREMENTAL COSTS AND REVENU...

290.

CSO: 2D1b

LOS: 2D1b

The following schedule reflects the incremental costs and revenues for a capital project.

The company uses straight-line depreciation. The interest expense reflects an allocation

of interest on the amount of this investment, based on the company’s weighted average

cost of capital.

Revenues

$650,000

Direct costs

$270,000

Variable overhead

50,000

Fixed overhead

20,000

Depreciation

70,000

General & administrative

40,000

Interest expense

8,000

Total costs

458,000

Net profit before taxes

$192,000

The annual cash flow from this investment, before tax considerations, would be

a.

$192,000.

b.

$200,000.

c.

$262,000.

d.

$270,000.