For capital budgeting purposes, which of these is considered a cash inflow?

A decrease in the cash balance

An increase in accounts receivable

An increase in inventory

A decrease in accounts payable

You decide to open a Blank Street Coffee style automated coffee truck downtown. Buying and outfitting the truck will cost $$47,000,$ eligible for bonus depreciation, and you will need $$2,000$ in working capital. After five years, the truck and equipment will have $$10,000$ of salvage value.

The lattes will be priced at an average of $$5$ and cost $$2$ to make.

You will have a $20\%$ tax rate and a small business loan at $8\%.$

Over a five year horizon, what is the break$-$even number of lattes that you will need to sell per year?

Your firm is considering launching a new product offering. To launch the project will cost $$0\mathrm{.}8$ million in upfront costs, eligible for $100\%$ bonus depreciation. Over the next three years you estimate you can sell $300$ each year, at a price of $$10,000$ in year $1,$ $$9,000$ in year $2,$ and $$6,000$ in year $3.$ The all in costs to produce the product are $$4,400$ per unit.

The fixed assets will have a salvage value of $$0\mathrm{.}4$ million in three years$$ time. If your firm's tax rate is $22\%,$ and cost of capital is $18\%,$ what is the project NPV$?$

You are evaluating a project that would require $$120,000$ of capital expenditure today. You estimate it will generate $$56,000$ per year in added revenues and $$30,000$ added costs per year, for the next five years.

The fixed assets will have $$20,000$ of salvage value and are eligible for $100\%$ bonus depreciation. You will need to hold additional inventory worth $$10,000$ while the project is running. Your firm's tax rate is $20\%.$ What is the project IRR?

You are valuing a small competitor firm for a possible acquisition. In year $1,$ the firm will generate $$30$ million in EBITDA, and will require $$5$ million in maintenance capex.

The firm's tax rate is $20\%$ and the maintenance capex is all depreciated in the same year it is spent.

All year $1$ values will grow at $2\%$ per year in perpetuity. The discount rate is $15\%.$

The firm is $100\%$ equity financed and has $4$ million shares outstanding. What is the fundamental value per share?

What is the fair value of a call option on the S&P$500$ index with the following inputs:

Strike price $=5300$

Index level $=5170$

Volatility $=24\%$

Treasury bill rate $=5\%$

Maturity $=1$ month

S&P Index: $5150$

$1$ month S&P Call option with a strike price @$5200$ is trading at $$115\mathrm{.}37$

Current $1$ month T$-$bill rate: $4\mathrm{.}1\%$

What is the implied volatility of the S&P $500?($meaning$,$ at what level is the VIX?$)$

ou have just been hired at a small AI software firm firm. Your pay package consists of:

$1)$ A $$120,000$ salary, and

$2)5,000$ four$-$year warrants with a strike price of $$50$ on the firm's stock.

The stock last traded at $$22\mathrm{.}10$ per share, has a volatility of $40\%,$ and the Treasury rate is $4\mathrm{.}4\%.$ What is the total value of your pay package?

If a firm's management decides to play it safe, so the volatility of future cash flows goes down, the value of the firm's shares will go $\_\_\_\_$ while the value of the firm's bonds will go $\_\_\_\_.$

You are considering introducing a new line of tests at your genetics firm. You previously did test$$marketing and surveys at a cost of $$12,000.$ Based on the results, you estimate that you could sell $2000$ of the new tests at a price of $$199.$

$500$ of those sales would be to customers who would have bought your old test, which costs $$299.$ The remaining tests would be sold to new customers. Both tests cost $$80$ per unit to produce, and your firm's tax rate is $20\%.$ What is the after$-$tax incremental revenue of introducing the new line of tests?

You are evaluating a project that would require $$120,000$ of capital expenditure today. You estimate it will generate $$56,000$ per year in added revenues and $$30,000$ added costs per year, for the next five years.

The fixed assets will have $$20,000$ of salvage value and are eligible for $100\%$ bonus depreciation. You will need to hold additional inventory worth $$10,000$ while the project is running. Your firm's tax rate is $20\%.$ What is the project IRR?

You are valuing a small competitor firm for a possible acquisition. In year $1,$ the firm will generate $$30$ million in EBITDA, and will require $$5$ million in maintenance capex.

The firm's tax rate is $20\%$ and the maintenance capex is all depreciated in the same year it is spent.

All year $1$ values will grow at $2\%$ per year in perpetuity. The discount rate is $15\%.$

The firm is $100\%$ equity financed and has $4$ million shares outstanding. What is the fundamental value per share?

Question $5$

$\frac{0}{1\mathrm{.}5}$ pts

Your firm is considering launching a new product offering. To launch the project will cost $$0\mathrm{.}8$ million in upfront costs, eligible for $100\%$ bonus depreciation. Over the next three years you estimate you can sell $300$ each year, at a price of $$10,000$ in year