Nova Southeastren University Spring 2015 Finace Fin5080 Quiz 2

• Question 1

0 out of 1 points

ABC has a proposed project which will generate sales of 133 units at a selling price of $286 each. The fixed costs are $23,462 and the variable costs per unit are $78. The project requires $185,974 of machinery which will be depreciated on a straight-line basis over the 5-year life of the project. The tax rate is 29%. What is the operating cash flow for year 5?

Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

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Or,

(Sales-Variable Costs-Fixed Costs-Depreciation)*(1-tax rate) + Depreciation = Annual Operating CFs

• Question 2

1 out of 1 points

The net working capital invested in a project is generally:

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• Question 3

0 out of 1 points

A project has an annual operating cash flow of $13,180. Initially, this 4-year project required $3,885 in net working capital, which is recoverable when the project ends. The firm also spent $10,000 on equipment to start the project. This equipment will have a book value of $3,386 at the end of year 4. What is the total cash flow for year 4 of the project if the equipment can be sold for $5,813 and the tax rate is 26%?

Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

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• Question 4

0 out of 1 points

A project has an initial requirement of $234,433 for new equipment and $9,764 for net working capital. The fixed assets will be depreciated to a zero book value over the 3-year life of the project and have an estimated salvage value of $90,213. All of the net working capital will be recouped at the end of the project. The annual operating cash flow is $76,816 and the cost of capital is 10% What is the project's NPV if the tax rate is 29%?

Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

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• Question 5

0 out of 1 points

ABC Company purchased some new equipment 2 years ago for $175,870. Today, it is selling this equipment for $73,998. What is the aftertax cash flow from this sale if the tax rate is 25 percent? The MACRS allowance percentages are as follows, commencing with year one: 20.00, 32.00, 19.20, 11.52, 11.52, and 5.76 percent.

Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

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• Question 6

0 out of 1 points

Which of the following cash flows are NOT considered in the calculation of the initial outlay for a capital investment proposal?

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• Question 7

1 out of 1 points

ABC Compay has the following projections for Year 1 of a capital budgeting project.

Year 1 Incremental Projections:

Sales $702,819

Variable Costs $128,606

Fixed Costs $21,467

Depreciation Expense $42,997

Tax Rate 28%

Calculate the operating cash flow for Year 1.

Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

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• Question 8

1 out of 1 points

A project requires $340,508 of equipment that is classified as 7-year property. What is the book value of this asset at the end of year 5 given the following MACRS depreciation allowances, starting with year one: 14.29, 24.49, 17.49, 12.49, 8.93, 8.92, 8.93, and 4.46 percent?

Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

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• Question 9

1 out of 1 points

A project requires $489,386 of equipment that is classified as 7-year property. What is the book value of this asset at the end of year 3 given the following MACRS depreciation allowances, starting with year one: 14.29, 24.49, 17.49, 12.49, 8.93, 8.92, 8.93, and 4.46 percent?

Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

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• Question 10

1 out of 1 points

Sunk costs are a type of incremental cash flow that should be included in all capital-budgeting decisions.

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• Question 11

0 out of 1 points

ABC Company purchased $32,228 of equipment 5 years ago. The equipment is 7-year MACRS property. The firm is selling this equipment today for $9,283. What is the aftertax cash flow from this sale if the tax rate is 38 percent? The MACRS allowance percentages are as follows, commencing with year one: 14.29, 24.49, 17.49, 12.49, 8.93, 8.92, 8.93, and 4.46 percent.

Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

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• Question 12

0 out of 1 points

ABC Inc. has estimated the following revenues and expenses related phase I of a proposed new housing development? Incremental sales= $6,311,329, total cash expenses $3,604,173, depreciation $689,097, taxes 28%, interest expense, $200,000. What are the operating cash flows?

Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

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• Question 13

0 out of 1 points

ABC Inc. has estimated the following revenues and expenses related phase I of a proposed new housing development? Incremental sales= $554,021, total cash expenses $388,188, depreciation $65,276, taxes 39%. What are the operating cash flows?

Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

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• Question 14

0 out of 1 points

ABC Corporation is considering an expansion project. The necessary equipment could be purchased for $18,698 and shipping and installation costs are another $1,287. The project will also require an initial $3,443 investment in net working capital. The company's tax rate is 40%. What is the project's initial investment outlay?

Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

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• Question 15

0 out of 1 points

A project has an initial requirement of $214,581 for new equipment and $11,276 for net working capital. The installation costs to get the new equipment in working condition are 12,523. The fixed assets will be depreciated to a zero book value over the 4-year life of the project and have an estimated salvage value of $75,213. All of the net working capital will be recouped at the end of the project. The annual operating cash flow is $112,818 and the cost of capital is 10% What is the project's NPV if the tax rate is 37%?

Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

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• Question 16

0 out of 1 points

ABC Company purchased $18,180 of equipment 4 years ago. The equipment is 7-year MACRS property. The firm is selling this equipment today for $7,727. What is the aftertax cash flow from this sale if the tax rate is 39 percent? The MACRS allowance percentages are as follows, commencing with year one: 14.29, 24.49, 17.49, 12.49, 8.93, 8.92, 8.93, and 4.46 percent.

Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

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• Question 17

0 out of 1 points

ABC Company has a proposed project that will generate sales of 433 units annually at a selling price of $192 each. The fixed costs are $5,230 and the variable costs per unit are $120. The project requires $24,691 of equipment that will be depreciated on a straight-line basis to a zero book value over the 4-year life of the project. The salvage value of the fixed assets is $6,900 and the tax rate is 37 percent. What is the operating cash flow for year four?

Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

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• Question 18

1 out of 1 points

A project requires $320,027 of equipment that is classified as 7-year property. What is the depreciation expense in year 3 given the following MACRS depreciation allowances, starting with year one: 14.29, 24.49, 17.49, 12.49, 8.93, 8.92, 8.93, and 4.46 percent?

Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

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