Which of the following cash flows are NOT considered in the calculation of the initial

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

		Equipment Cost
		All of the above should be considered
		Increase in net working capital requirements
		Cost of Installing new equipment
		Interest expense related to financing a project

1 points

Question 2

1. 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.

1 points

Question 3

1. ABC Inc. has estimated the following revenues and expenses related phase I of a proposed new housing development? Incremental sales= $682,242, total cash expenses $341,299, depreciation $32,351, taxes 27%. 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.

1 points

Question 4

1. ABC Company purchased $36,598 of equipment 5 years ago. The equipment is 7-year MACRS property. The firm is selling this equipment today for $7,870. 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.

1 points

Question 5

1. ABC Company purchased $19,480 of equipment 4 years ago. The equipment is 7-year MACRS property. The firm is selling this equipment today for $6,379. What is the aftertax cash flow from this sale if the tax rate is 36 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.

1 points

Question 6

1. The net working capital invested in a project is generally:

		depreciated to a zero balance over the life of the project.
		an opportunity cost.
		recovered at the start of the project.
		a sunk cost.
		recovered at the end of the project.

1 points

Question 7

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

Year 1 Incremental Projections:

Sales $421,608

Variable Costs $25,544

Fixed Costs $43,673

Depreciation Expense $93,419

Tax Rate 29%

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.

1 points

Question 8

1. ABC Company has a proposed project that will generate sales of 437 units annually at a selling price of $177 each. The fixed costs are $7,495 and the variable costs per unit are $89. The project requires $29,574 of equipment that will be depreciated on a straight-line basis to a zero book value over the 4-year life of the project. That is, depreciation each year is $29,574/4. The salvage value of the fixed assets is $6,900 and the tax rate is 26 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.

1 points

Question 9

1. A project has an initial requirement of $234,703 for new equipment and $12,219 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 $108,009. All of the net working capital will be recouped at the end of the project. The annual operating cash flow is $68,463 and the cost of capital is 6% What is the project's NPV if the tax rate is 38%?

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.

1 points

Question 10

1. A project has an annual operating cash flow of $14,379. Initially, this 4-year project required $2,967 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 $2,688 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 $4,720 and the tax rate is 30%?

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.

1 points

Question 11

1. A project requires $329,948 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.

1 points

Question 12

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

True

False

1 points

Question 13

1. A project requires $420,975 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.

1 points

Question 14

1. ABC Inc. has estimated the following revenues and expenses related phase I of a proposed new housing development? Incremental sales= $5,724,896, total cash expenses $3,487,852, depreciation $799,971, taxes 35%, interest expense, $200,000. What are the operating cash flows?

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.

1 points

Question 15

1. ABC Corporation is considering an expansion project. The necessary equipment could be purchased for $20,528 and shipping and installation costs are another $1,756. The project will also require an initial $5,399 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.

1 points

Question 16

1. A project has an initial requirement of $184,951 for new equipment and $13,297 for net working capital. The installation costs to get the new equipment in working condition are 4,899. 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 $144,292. All of the net working capital will be recouped at the end of the project. The annual operating cash flow is $102,870 and the cost of capital is 15% What is the project's NPV if the tax rate is 34%?

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.

1 points

Question 17

1. ABC has a proposed project which will generate sales of 176 units at a selling price of $273 each. The fixed costs are $11,334 and the variable costs per unit are $58. The project requires $195,871 of machinery which will be depreciated on a straight-line basis over the 5-year life of the project. That is, depreciation each year is $195,871/5.The tax rate is 30%. 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.

1 points

Question 18

1. A project requires $113,828 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.