5. You have just completed a $20,000 feasibility study for a new coffee shop in some retail space you own. You bought the space two years ago for $100,000, and if you sold it today, you would net $115,000 after taxes. Outfitting the space for a coffee shop would require a capital expenditure of $30,000 plus an initial investment of $5,000 in inventory. What is the correct initial cash flow for your analysis of the coffee shop opportunity?

6. A proposed new project has projected sales of $156,000, costs of $119,000, and depreciation of $4,500. The tax rate is 35 percent. Calculate operating cash flow.

7. You purchased a machine for $1 million three years ago and have been applying straight-line depreciation to zero for a seven-year life. Your tax rate is 35%. If you sell the machine today (after three years of depreciation) for $700,000, what is your after-tax cash flow from selling the machine?

8. Castle View Games is opening a new division that will develop software. Since it is a new division, there is currently no net working capital invested. The CFO has projected the following amounts for current assets and current liabilities for the division. Cash:$6,000; Accounts Receivable:$21,000; Inventory:$5,000; and Accounts Payable: $18,000. Calculate the net working capital investment that will be required for the software division.

9. You are considering making a movie. The movie is expected to cost $10 million up front and take a year to produce. After that, it is expected to make $5 million in the year it is released and $2 million for the following four years. If you require a payback period of two years, will you make the movie?