13.A company is planning to replace old equipment with new, more efficient equipment. The company spent $100,000 on a market study and consulting a few months ago. It purchased the old equipment 15 years ago for $2,300,000. The old equipment is depreciated to $500,000 and has a market value of $400,000 today. The new equipment will cost $2,500,000. In order to make the equipment operable, the company must pay $120,000 for shipping and $150,000 for necessary training. With the anticipated growth due to the equipment replacement, the company has to invest $90,000 in working capital. The marginal tax rate is 32%. What is the initial outlay of this project to replace old equipment?

a. $2,928,000

b. $2428,000 c. $2,528,000

d. $2,328,000

14. A firm is evaluating a new capital project. The firm spent $45,000 on a market study and $30,000 on consulting three months ago. If the firm approves the project, it will spend $800,000 on new machinery, $60,000 on installation, and $10,000 on shipping. The machine will be depreciated via simplified straight-line depreciation over its 12-year life. The expected sales increase from this new project is $500,000 a year, and the expected incremental expenses are $200,000 a year. In order to start this new project, the company will invest $100,000 in working capital. The marginal tax rate is 40%. What is the annual net cash flow per year from this project?

a. $206,667

b. $212,333

c. $211,500

d. $209,000

e. $136,500

15. You are a project manager. You are estimating the cash flows of a potential project that requires an investment of $200,000, including installation cost, and $30,000 in working capital, which will be fully recaptured at the end of the project. The machine has an estimated life of six years and will be depreciated via the simplified straight-line method. The project is expected to raise the firms annual revenues by $330,000 and increase annual costs by $125,000. The machine you purchase for the project can be sold for $40,000 in six years. The firm has a marginal tax rate of 40%. What is the terminal value of the project?

a. $54,000

b. $16,000

c. $46,000

d. $40,000

e. $70,000