1). Your Company is considering a new project that will require $11,000 of new equipment at the start of the project. The equipment will have a depreciable life of 6 years and will be depreciated to a book value of $2,000 using straight-line depreciation. The cost of capital is 8%, and the firm's tax rate is 30%. Estimate the present value of the tax benefits from depreciation.

2). You are evaluating a product for your company. You estimate the sales price of product to be $290 per unit and sales volume to be 11,900 units in year 1; 26,900 units in year 2; and 6,900 units in year 3. The project has a 3 year life. Variable costs amount to $215 per unit and fixed costs are $219,000 per year. The project requires an initial investment of $381,000 in assets which will be depreciated straight-line to zero over the 3 year project life. The actual market value of these assets at the end of year 3 is expected to be $59,000. NWC requirements at the beginning of each year will be approximately 13% of the projected sales during the coming year. The tax rate is 40% and the required return on the project is 8%. What will the year 2 cash flows for this project be?

3). You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck for $240,000. The truck falls into the MACRS 7-year class, and it will be sold after 7 years for $24,000. Use of the truck will require an increase in NWC (spare parts inventory) of $5,400. The truck will have no effect on revenues, but it is expected to save the firm $102,000 per year in before-tax operating costs, mainly labor. The firm's marginal tax rate is 30 percent. What will the cash flows for this project be during year 2?

4). Forecasted sales drive all of the following EXCEPT:

• the amount of assets needed.
• the liabilities needed.
• the external funds needed.
• earnings per share on the annual report.