1.) You plan to replace a $250,000 piece of equipment in 5 years. You want to ensure that you can pay for the equipment in cash.

If your bank savings account pays 12% annually, about how much do you need to invest today in order to have $250,000 in 5 years?

Hint: Be sure to use a present value factor table.

Answer

$21,000

$50,000

$123,000

$142,000

$167,941

2.) An investment opportunity will yield an annual $200,000 Cash Revenues (i.e., Cash Flow from Operations) and $40,000 in Cash-based Operating Expenses. This investment has $-0- Depreciation Expense, and Income Taxes are 25%.

What is the Pre-tax "INCREMENTAL CASH FLOW FROM OPERATIONS" from this opportunity?

Answer

$40,000

$160,000

$120,000

$150,000

3.) An investment opportunity will yield an annual $200,000 Cash Revenues (i.e., Cash Flow from Operations) and $40,000 in Cash-based Operating Expenses. This investment has $-0- Depreciation Expense, and Income Taxes are 25%.

What is the "AFTER-TAX CASH FLOW FROM OPERATIONS" from this opportunity?

Answer

		$160,000
		$40,000
		$120,000
		$150,000