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Olaf’s Pizza Company is considering adding more dining space to its already successful restaurant. The owner,...

Olaf’s Pizza Company is considering adding more dining space to its already successful restaurant. The owner, Kristoff, has determined that the new dining space will add $100,000 per year in additional sales. The expenses on the expansion will be 45% of the new sales. As part of the expansion, additional cooking equipment will be purchased with an installed cost of $30,000. The equipment will be depreciated using a 7-year MACRS schedule. The tax rate facing the firm is 35%.

What is the project cash flow for year 1 of the project?

$40.500.45

$37,750.60

$41,000.60

$37,250.45

$30,750
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