1. Assume that a company is considering a $2,400,000 capital investment in a project that would earn net income for each of the next five years as follows:

Sales $ 1,900,000

Variable expenses 800,000

Contribution margin 1,100,000

Fixed expenses:

Out-of-pocket operating costs $ 300,000

Depreciation 400,000 700,000

Net operating income $ 400,000

If the companys discount rate is 23%, then the projects net present value is closest to:

Multiple Choice

$(1,278,800).

$(157,600).

$(107,300).

$141,010.

2. If you invested $1,500 in a stock today and it earned an 11% return in each of the next three years, then the value of the stock at the end of three years would be closest to:

Multiple Choice

$2,081.

$2,121.

$2,051.

$1,961.

3.

Assume that a company has provided the following information regarding a capital investment opportunity:

Initial investment in equipment	$ 150,000
Initial investment in working capital	$ 30,000
Estimated annual sales	$ 160,000
Estimated annual cash operating expenses	$ 84,000
Repairs and maintenance in 3 years	$ 20,000

The equipment has a four-year useful life and no salvage value. The working capital will be released at the end of the project. The companys tax rate is 30%. The income tax expense for Year 4 of this investment is closest to:

Multiple Choice

$11,550.

$31,200.

$14,550.

$12,800.