1) Glassparts, Inc. uses machines to manufacture windshields for automobiles. One

machine costs $142,000 and lasts about 5 years before it needs replaced. The operating cost

per machine is $7,000 a year. What is the equivalent annual cost of one machine if the

required rate of return is 11%? (Round your answer to whole dollars)

A. $30,811

B. $33,574

C. $35,400

D. $37,267

E. $45,421

2)

Wong Exporters purchased an $89,000 truck that belongs in CCA class 10 (a 30% class).

The company has a marginal tax rate of 33% and a discount rate of 12%. After 3 years, the

company expects to sell the truck for $36,501. What is the after-tax salvage value at the time

of the intended sale? (Assume that Wong owns several other vehicles.)

A. $35,006

B. $35,600

C. $36,203

D. $36,634

E. $37,697

3)

The Monumental Co. is considering purchasing a piece of equipment costing $642,001.

The equipment belongs in a 30% CCA class. What is the anticipated tax shield in year three

on this equipment if the company is in the 34% marginal tax bracket?

A. $22,799

B. $23,469

C. $32,087

D. $33,438

E. $38,963

4)

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%. What is the operating cash flow for this project?

A. $26,400

B. $26,600

C. $30,000

D. $46,400

5)

Downtown Candies is considering replacing the equipment it uses to make chocolate

candy bars. The equipment would cost $721,000 and lower manufacturing costs by an

estimated $170,000 a year. The equipment belongs in a 30% CCA class. The required rate of

return is 14% and the tax rate is 35%. What is the increase in net income for the second year

from this proposed project?

A. -$9,006

B. -$417

C. $25,550

D. $40,203

E. $47,200

6)

The Windom Co. has sales of $845,960, costs of $578,402, interest expense of $42,750,

and a marginal tax rate of 35%. The company also has $1,299,998 in fixed assets that are

being depreciated in a 15% CCA class (you may assume that the year rule has been applied

to all of the assets in the pool in the past). What is the operating cash flow for the current

year?

A. $210,911

B. $211,125

C. $224,808

D. $255,125

E. $267,558