1 A large manufacture company is considering the purchase of a $300,000 inventory management system. The system will be depreciated straight-line to zero over its 5- year life. It will be worth $40,000 at the end of that time. The system will save the company $80,000 before taxes in inventory-related costs. Tax rate is 40 percent. As a result of the new system being more efficient than our current one, they will be able to use less total inventory and therefore free up $50,000 in net working capital. What is the NPV at 15 percent? (6 Points) Consider the following two mutually exclusive projects: The required return is 15 percent for both projects. Calculate the NPV for each project and based on the NPV which one should be accepted? (4 Points) Year 0 1 2 3 4 Cash Flow (A) -$318,844 27,700 56,000 55,000 399,000 Cash Flow (B) -$27,476 9,057 10,536 11,849 13,814 1:09 ACC 352: International Corporate Finance...... 14 In general the after-tax cost of debt rises when a company's bond rate increases and tax rates decline. (2 Points) False True 15 The original yield to maturity on the most recent bonds issued by a company can be considered as the pretax cost of debt (2 Points) False True Submit This content is created by the owner of the form. The data you submit will be sent to the form owner. Microsoft is not responsible for the privacy or security practices of its customers, including those of this form owner. Never give out your password Powered by Microsoft | Terms of use