FIN 3403017 Principles of Financial Mgmt (Spring 2015) Chapter 10 Quiz

| June 5, 2016

Review Test Submission: Chapter 10 Quiz


Principles of Financial Mgmt [Spring 2015]


Chapter 10 Quiz


4/19/15 9:49 PM


4/19/15 9:56 PM



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Submitted Answers

· Question 1

1 out of 1 points

The Clothing Co. is looking at a project that will require and initial increase of $40,000 in net working capital and $100,000 in fixed assets. The project is expected to produce annual sales of $90,000 with associated costs of $60,000. The project has a 10-year life. The company uses straight-line depreciation to a zero book value over the life of the project. The tax rate is 35 percent. What are the operating cash flows for this project and what is the IRR for this entire project?

· Question 2

1 out of 1 points

The tax savings generated as a result of a firm’s depreciation expense is called the:

· Question 3

1 out of 1 points

You are considering the purchase of new equipment. Your analysis includes the evaluation of two machines which have differing initial and ongoing costs and differing lives. You should select the machine which has the:

· Question 4

1 out of 1 points

Shelly’s Boutique is evaluating a project which will increase annual sales by $70,000 and annual costs by $40,000. The project will initially require $100,000 in fixed assets which will be depreciated straight-line to a zero book value over the 5-year life of the project. The applicable tax rate is 34 percent. What are the operating cash flows for this project from years 1-5 and what is the NPV of the entire project if the WACC is 7%?

· Question 6

1 out of 1 points

A project is expected to create operating cash flows of $35,000 a year for four years. The initial cost of the fixed assets is $100,000. These assets will be worthless at the end of the project. An initial $5,000 of net working capital will be required at the project’s start. What is the project’s net present value if the required rate of return is 11 percent?

· Question 10

1 out of 1 points

A project’s operating cash flow will increase when:

· Question 11

1 out of 1 points

The Furniture Makers purchased some fixed assets three years ago for $52,000. The assets are classified as 5-year property for MACRS. The company is considering selling these assets now so they can buy some newer fixed assets which utilize the latest in technology. The company has been offered $15,500 for these old assets. What is the net cash flow from the salvage value if the tax rate is 34 percent?

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