Finance 18 Questions Quiz 2 (2015)

| June 6, 2016

Question

QUESTION 1

A project has an initial requirement of $237,049 for new equipment and $14,802 for net working capital. The installation costs to get the new equipment in working condition are 4,678. 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 $125,962. All of the net working capital will be recouped at the end of the project. The annual operating cash flow is $82,751 and the cost of capital is 7% What is the project’s NPV if the tax rate is 35%??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 2

ABC Company purchased $44,595 of equipment 5 years ago. The equipment is 7-year MACRS property. The firm is selling this equipment today for $10,439. What is the aftertax cash flow from this sale if the tax rate is 31 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 3

ABC Company has a proposed project that will generate sales of 332 units annually at a selling price of $278 each. The fixed costs are $6,744 and the variable costs per unit are $29. The project requires $33,280 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 28 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 4

ABC Corporation is considering an expansion project. The necessary equipment could be purchased for $27,519 and shipping and installation costs are another $1,429. The project will also require an initial $5,165 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 5

A project requires $238,649 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 6

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

1 points

QUESTION 7

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

Year 1 Incremental Projections:?

Sales $618,196?

Variable Costs $130,263?

Fixed Costs $35,467?

Depreciation Expense $93,218?

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

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.??????

1 points

QUESTION 9

A project requires $222,307 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 10

ABC Company purchased $19,706 of equipment 4 years ago. The equipment is 7-year MACRS property. The firm is selling this equipment today for $5,290. 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: 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 11

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

All of the above should be considered?

Cost of Installing new equipment?

Increase in net working capital requirements?

Interest expense related to financing a project?

Equipment Cost?

???

1 points

QUESTION 12

The net working capital invested in a project is generally:??

a sunk cost.?

recovered at the end of the project.?

depreciated to a zero balance over the life of the project.?

recovered at the start of the project.?

an opportunity cost.?

???

1 points

QUESTION 13

A project has an annual operating cash flow of $11,320. Initially, this 4-year project required $4,330 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 $2,410 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 $5,495 and the tax rate is 25%??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

ABC Inc. has estimated the following revenues and expenses related phase I of a proposed new housing development? Incremental sales= $5,523,211, total cash expenses $2,973,652, depreciation $303,511, taxes 29%, 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.??????

1 points

QUESTION 15

A project requires $459,797 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.??????

1 points

QUESTION 16

ABC Inc. has estimated the following revenues and expenses related phase I of a proposed new housing development? Incremental sales= $652,213, total cash expenses $322,556, depreciation $57,458, taxes 38%. 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 17

ABC has a proposed project which will generate sales of 130 units at a selling price of $253 each. The fixed costs are $15,106 and the variable costs per unit are $69. The project requires $114,415 of machinery which will be depreciated on a straight-line basis over the 5-year life of the project. The tax rate is 33%. 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.??????

QUESTION 18

ABC Company purchased some new equipment 2 years ago for $392,323. Today, it is selling this equipment for $30,301. What is the aftertax cash flow from this sale if the tax rate is 35 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.

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