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1. Quick Computing currently sells 16 million computer chips each year at a price of $24 per chip. It is about to introduce a new chip, and it forecasts annual sales of 17 million of these improved chips at a price of $30 each. However, demand for the old chip will decrease, and sales of the old chip are expected to fall to 5 million per year. The old chips cost $9 each to manufacture, and the new ones will cost $12 each. What is the proper cash flow to use to evaluate the present value of the introduction of the new chip? (Enter your answer in millions.) Cash flow million 2. Tubby Toys estimates that its new line of rubber ducks will generate sales of $7.80 million, operating costs of $4.80 million, and a depreciation expense of $1.80 million. If the tax rate is 30%, what is the firm's operating cash flow? (Enter your answer in millions rounded to 2 decimal places.) Firm's operating cash flow million 3. Laurel's Lawn Care, Ltd., has a new mower line that can generate revenues of $153,000 per year. Direct production costs are $51,000, and the fixed costs of maintaining the lawn mower factory are $20,500 a year. The factory originally cost $1.02 million and is being depreciated for tax purposes over 20 years using straightline depreciation. Calculate the operating cash flows of the project if the firm's tax bracket is 30%. (Enter your answer in dollars not in millions.) Operating cash flows 4. Gluon Inc. is considering the purchase of a new high pressure glueball. It can purchase the glueball for $150,000 and sell its old lowpressure glueball, which is fully depreciated, for $26,000. The new equipment has a 10year useful life and will save $34,000 a year in expenses. The opportunity cost of capital is 11%, and the firm's tax rate is 40%. What is the equivalent annual savings from the purchase if Gluon uses straightline depreciation? Assume the new machine will have no salvage value. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Equivalent annual savings 5. Quick Computing installed its previous generation of computer chip manufacturing equipment 3 years ago. Some of that older equipment will become unnecessary when the company goes into production of its new product. The obsolete equipment, which originally cost $43.5 million, has been depreciated straightline over an assumed tax life of 5 years, but it can be sold now for $18.7 million. The firm's tax rate is 40%. What is the aftertax cash flow from the sale of the equipment? (Enter your answer in millions rounded to 1 decimal place.) After-tax cash flow million 6. Bottoms Up Diaper Service is considering the purchase of a new industrial washer. It can purchase the washer for $7,500 and sell its old washer for $2,000. The new washer will last for 6 years and save $2,000 a year in expenses. The opportunity cost of capital is 16%, and the firm's tax rate is 40%. a. If the firm uses straightline depreciation to an assumed salvage value of zero over a 6year life, what is the annual operating cash flow of the project in years 1 to 6? The new washer will in fact have zero salvage value after 6 years, and the old washer is fully depreciated. Annual operating cash flow b. What is project NPV? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.) NPV c. What is NPV if the firm uses MACRS depreciation with a 5year tax life? Use the MACRS depreciation schedule. (Do not round intermediate calculations. Round your answer to 2 decimal places.) NPV 7. Canyon Tours showed the following components of working capital last year: Beginni End of ng Year Accounts 27,00 $ $ 24,500 receivable 0 13,50 Inventory 15,500 0 Accounts 16,00 19,500 payable 0 a. What was the change in net working capital during the year? (A negative amount should be indicated by a minus sign.) Change in net working capital b. If sales were $37,500 and costs were $25,500, what was cash flow for the year? Ignore taxes. Cash flow 8. A house painting business had revenues of $16,500 and expenses of $9,500 last summer. There were no depreciation expenses. However, the business reported the following changes in working capital: Accounts receivable Accounts payable 1,70 5,00 $ $ 0 0 800 350 Calculate net cash flow for the business for this period. Net cash flow