1. Kenny, Inc., is looking at setting up a new manufacturing plant in South Park. The company bought some land six years ago for $8 million in anticipation of using it as a warehouse and distribution site, but the company has since decided to rent facilities elsewhere. The land would net $10.8 million if it were sold today. The company now wants to build its new manufacturing plant on this land; the plant will cost $22 million to build, and the site requires $950,000 worth of grading before it is suitable for construction. What is the proper cash flow amount to use as the initial investment in fixed assets when evaluating this project? (Enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

Cash flow $

2. Fill in the missing numbers in the following income statement: (Do not round intermediate calculations and round your answers to the nearest whole number, e.g. 32.)

Sales	$	645,600
Costs		347,100
Depreciation		97,800
EBIT	$
Taxes (35%)
Net income	$

What is the OCF? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g. 32.) OCF $ What is the depreciation tax shield? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g. 32.) Depreciation tax shield $

3. A piece of newly purchased industrial equipment costs $1,150,000 and is classified as seven-year property under MACRS. The MACRS depreciation schedule is shown in the MACRS Table. Calculate the annual depreciation allowances and end-of-the-year book values for this equipment. (Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32. Leave no cells blank. Enter "0" when necessary.)

Year	Beginning Book Value	Depreciation Allowance	Ending Book Value
1	$	$	$
2
3
4
5
6
7
8
4. H. Cochran, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2,640,000. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be worthless. The project is estimated to generate $2,330,000 in annual sales, with costs of $1,320,000. If the tax rate is 35 percent, what is the OCF for this project? (Enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)