Question
A new project involves buying a printing machine for $9000 today. The machine would be depreciated on a straight-line basis over its 3-year useful life
A new project involves buying a printing machine for $9000 today. The machine would be depreciated on a straight-line basis over its 3-year useful life to a book value of $652. At the end of the life of the project (at the year 3 point), the machine will be sold for an estimated $853. The project will cause an increase in Sales of $5,710 in each of years 1 through 3. It is also expected to increase operating expenses by $2,352 in each of years 1 through 3. The project will require an increase in Inventory of $693 and an increase in Accounts Payable of $830 up front. The project's impact on these accounts is expected to disappear at project end (in year 3). The firm's marginal tax rate is 40%, and its WACC is 12%.
27. The total initial cash flow today is equal to ___________.
a. -$8863 b. +$8863 c. -$9137 d. +$9137
28. The cash flows in years 1 and 2 is equal to ________.
a. $3127.87 b. $5643.4 c. $6506.8 d. $4063.6
29. The cash flows from asset sales is equal to ______________.
a. $732.40 b. $652.00 c. $933.30 d. $1054.00
30. Should this project be accepted?
a. Yes b. No
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