Assume the following for your corporation:

sales (aka revenue) = $250

Cost of goods sold = 160

depreciation = 35

Interest Expense = 20

tax rate = 34%

What is the corporation's total after tax net income?

23.10

11.90

35.00

46.20

Capital Budgeting Analysis: ASSUME a 4 year project's after-tax operating cash flow during years 1-4 = $8,000 and there is an after tax salvage value = $7,000 in year 4. The project also had an initial net working capital (NWC) investment of $1,000. Under conventional assumptions, what is the TOTAL cash flow expected from this project in the terminal year (year 4)?

7,000

8,000

15,000

16,000

ASSUME that in 25 years you will need $500,000 for your retirement (i.e. retirement is actually 25 years away, and you want to have saved $500,000). If you will make equal MONTHLY payments at the end of each MONTH for the next 25 years to fund your retirement, what is the amount of the MONTHLY payments required to fund your retirement? Assume the 8% APR discount rate with monthly compounding for this question.

3859

3903

570

526

Capital budgeting analysis: An asset is sold for a $10,000 market salvage value and the asset has a book value of $4,000 at the time of the sale. The firm's marginal tax rate is 40%. What is the after tax salvage value of the asset?

4,000

6,000

7,600

10,000

none of the above

Assume the following for a project under evaluation:

** The project's life is 4 years.

** The total time zero, initial cost of $55,000.

** The total net operating cash flow each year is $15,000.

** In addition to the terminal year operating cash flow, there is a non-operating, terminal year cash flow of $8,000.

What is the project's IRR? Accept or reject the project? Again, assume the cost of capital for a project of this risk is 7%.

7%; indifferent to accept or reject

8.4%; reject

8.4%; accept

15.75%, reject

15.75%: accept

If a tax paying firm pays $100,000 in interest, what is the after tax interest cost for the firm assuming they are in a 40% tax bracket?

100,000 since interest is paid after taxes are paid and thus there is no tax shield

40,000 since there is a tax shield on interest

60,000 since there is a tax shield on interest

insufficient information to compute