Which of the following statements is FALSE?
A) If a company anticipates an ongoing surplus of cash, it may choose to increase its dividend payout.
B) Seasonal sales can create large short-term cash flow deficits and surpluses.
C) The first step in short-term financial planning is to forecast the company's future net working capital.
D) Deficits resulting from investments in long-term projects are often financed using long-term sources of capital, such as equity or long-term bonds.
C
Explanation: C) The first step in short-term financial planning is to forecast the company's future cash flows.
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CathFoods will release a new range of candies which contain antioxidants. New equipment to manufacture the candy will cost $2 million, which will be depreciated by straight-line depreciation over four years
In addition, there will be $5 million spent on promoting the new candy line. It is expected that the range of candies will bring in revenues of $4 million per year for four years with production and support costs of $1.5 million per year. If CathFood's marginal tax rate is 35%, what are the incremental free cash flows in the second year of this project? A) $1.800 million B) $1.400 million C) $2.000 million D) $0.700 million