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Qz 9 Firm A uses straight-line depreciation. Firm B uses MACRS depreciation. Both firms bought $75,000 worth of equipment last year that has a tax life of 5 years. The 5-year MACRS percentage rates, starting with Year 1, are: 20, 32, 19.2, 11.52, 11.52, and 5.76. Both firms have a marginal tax rate of 34 percent and identical operating cash flows except for the depreciation effects. Given this, you know the: Question 1 options: depreciation expense for Firm A will be greater than Firm B's expense every year. equipment has a higher value on Firm B's books than on Firm A's at the end of Year 2. operating cash flow of Firm A is greater than that of Firm B for Year 3. market value of Firm A's equipment is greater than the market value of Firm B's at end the first year. market value of Firm B's equipment is greater than the market value of Firm A's equipment at the end of Year 2. Question 2 (1.2 points) Question 2 Unsaved Flo is considering three mutually exclusive options for the additional space she plans to add to her specialty women's store. The cost of the expansion will be $148,000. She can use this additional space to add children's clothing, an exclusive gifts department, or a home dcor section. She estimates the present value of the cash inflows from these projects are $121,000 for children's clothing, $178,000 for exclusive gifts, and $145,000 for decorator items. Which option(s), if any, should she accept? Question 2 options: None of these options Children's clothing only Exclusive gifts only Exclusive gifts and decorator items only All three options Question 3 (1.2 points) Question 3 Unsaved Ed owns a store that caters primarily to men. Each of the answer options represents an item related to a planned store expansion. Each of these items should be included in the expansion analysis with the exception of the cost: Question 3 options: of the property insurance premium increase. of the exterior landscaping that will be required once the expansion is complete. of the additional sales person that will be required. of the inventory required to fill the additional retail space. of the blueprints that have been drawn of the expansion area. Question 4 (1.2 points) Question 4 Unsaved Sensitivity analysis: Question 4 options: looks at the most reasonably optimistic and pessimistic results for a project. helps identify the variable within a project that presents the greatest forecasting risk. is used for projects that cannot be analyzed by scenario analysis because the cash flows are unconventional. is generally conducted prior to scenario analysis just to determine if the range of potential outcomes is acceptable. illustrates how an increase in operating cash flow caused by changing both the revenue and the costs simultaneously will change the net present value for a project. Question 5 (1.2 points) Question 5 Unsaved You are analyzing a project and have developed the following estimates. The depreciation is $5,800 a year and the tax rate is 35 percent. What is the best-case operating cash flow? Question 5 options: $7,473.00 $4,196.80 $5,377.50 $6,701.40 $8,627.50 Question 6 (1.2 points) Question 6 Unsaved Jim's Hardware is adding a new product to its sales lineup. Initially, the firm will stock $36,000 of the new inventory, which will be purchased on 30 days' credit from a supplier. The firm will also invest $13,000 in accounts receivable and $11,000 in equipment. What amount should be included in the initial project costs for net working capital? Question 6 options: -$49,000 -$47,000 -$3,000 -$13,000 -$24,000 Question 7 (1.2 points) Question 7 Unsaved Kyle Electric has three positive net present value opportunities. Unfortunately, the firm has not been able to find financing for any of these projects. Which one of the following terms best fits the situation facing the firm? Question 7 options: Sensitivity analysis Capital rationing Soft rationing Contingency planning Sunk cost Question 8 (1.2 points) Question 8 Unsaved A project has an annual operating cash flow of $52,620. Initially, this four-year project required $5,160 in net working capital, which is recoverable when the project ends. The firm also spent $39,700 on equipment to start the project. This equipment will have a book value of $17,014 at the end of Year 4. What is the cash flow for Year 4 of the project if the equipment can be sold for $15,900 and the tax rate is 35 percent? Question 8 options: $63,749.90 $73,680.00 $74,069.90 $73,862.00 $73,290.10 Question 9 (1.2 points) Question 9 Unsaved The Shoe Box is considering adding a new line of winter footwear to its product lineup. When analyzing the viability of this addition, the company should include all of the following in its analysis with the exception of: Question 9 options: any expected changes in the sales levels of current products caused by adding the new productline. cost of new display counters for the additional winter footwear. increased taxes from winter footwear profits. the research and development costs to produce the current winter footwear samples. the expected revenue from winter footwear sales. Question 10 (1.2 points) Question 10 Unsaved Consider an asset that costs $311,000 and is depreciated straight-line to zero over its six-year tax life. The asset is to be used in a four-year project; at the end of the project, the asset can be sold for $58,000. If the relevant tax rate is 34 percent, what is the aftertax cash flow from the sale of this asset? Question 10 options: $73,526.67 $68,411.19 $70,103.33 $40,466.67 $42,473.33 Question 1 (1.2 points) Question 1 Unsaved Which one of the following is a correct value to use if you are conducting a best-case scenario analysis? Question 1 options: Sales price that is most likely to occur Lowest expected level of sales quantity Lowest expected salvage value Highest expected need for net working capital Lowest expected value for fixed costs Question 2 (1.2 points) Question 2 Unsaved The Outpost currently sells short leather jackets for $369 each. The firm is considering selling long coats also. The long coats would sell for $719 each and the company expects to sell 820 a year. If the company decides to carry the long coat, management feels that the annual sales of the short jacket will decline from 1,120 to 1,040 units. Variable costs on the jacket are $228 and $435 on the long coat. The fixed costs for this project are $23,100, depreciation is $10,400 a year, and the tax rate is 34 percent. What is the projected operating cash flow for this project? Question 2 options: $134,546 $131,264 $112,212 $131,062 $128,749 Question 3 (1.2 points) Question 3 Unsaved The operating cash flows of a project: Question 3 options: are unaffected by the depreciation method selected. are equal to the project's total projected net income. decrease when net working capital increases. include any aftertax salvage values. include erosion effects. Question 4 (1.2 points) Question 4 Unsaved Classic Cars is considering a project that requires $311,250 of fixed assets that are classified as five-year property for MACRS. What is the book value of these assets at the end of Year 3? The MACRS allowance percentages are as follows, commencing with Year 1: 20.00, 32.00, 19.20, 11.52, 11.52, and 5.76 percent. Question 4 options: $153,742 $136,811 $89,640 $93,450 $144,504 Question 5 (1.2 points) Question 5 Unsaved Better Chocolates has a new project that requires $838,000 of equipment. What is the depreciation in Year 6 of this project if the equipment is classified as seven-year property for MACRS purposes? The MACRS allowance percentages are as follows, commencing with year 1: 14.29, 24.49, 17.49, 12.49, 8.93, 8.92, 8.93, and 4.46 percent. Question 5 options: $80,411.60 $74,833.40 $89,108.00 $74,749.60 $89,327.08 Save Question 6 (1.2 points) Question 6 Unsaved Industrial Services is analyzing a proposed investment that would initially require $489,000 of new equipment. This equipment would be depreciated on a straight-line basis to a zero balance over the four-year life of the project. The estimated salvage value is $135,000. The project requires $32,000 initially for net working capital, all of which will be recouped at the end of the project. The projected operating cash flow is $174,900 a year. What is the internal rate of return on this project if the relevant tax rate is 35 percent? Question 6 options: 16.54 percent 17.01 percent 21.15 percent 18.67 percent 19.02 percent Question 7 (1.2 points) Question 7 Unsaved The amount by which a firm's tax bill is reduced as a result of the depreciation expense is referred to as the depreciation: Question 7 options: tax shield. credit. erosion. opportunity cost. adjustment. Question 8 (1.2 points) Question 8 Unsaved Which one of the following principles refers to the assumption that a project will be evaluated based on its incremental cash flows? Question 8 options: Forecast assumption principle Base assumption principle Fallacy principle Erosion principle Stand-alone principle Save Question 9 (1.2 points) Green Woods sells specialty equipment for mountain climbers. Its sales for last year included $387,000 of tents and $718,000 of climbing gear. For next year, management has decided to sell specialty sleeping bags also. As a result of this change, sales projections for next year are $411,000 of tents, $806,000 of climbing gear, and $128,000 of sleeping bags. How much of next year's sales are derived from the side effects of adding the new product to its sales offerings? Question 9 options: $0 $128,000 $112,000 $251,000 $240,000 Question 10 (1.2 points) Question 10 Unsaved An asset used in a three-year project falls in the three-year MACRS class for tax purposes. The MACRS percentage rates starting with Year 1 are: 33.33, 44.45, 14.81, and 7.41.The asset has an acquisition cost of $2.6 million and will be sold for $1.1 million at the end of the project. If the tax rate is 34 percent, what is the aftertax salvage value of the asset? Question 10 options: $742,519.10 $726,000.00 $832,056.60 $791,504.40 $887,560.15 Question 1 (1.2 points) Question 1 Unsaved Jamie is analyzing the estimated net present value of a project under various conditions by revising the sales quantity, sales price, and the cost estimates. The type of analysis that Jamie is doing is best described as: Question 1 options: sensitivity analysis. erosion planning. scenario analysis. benefit planning. opportunity evaluation. Question 2 (1.2 points) Question 2 Unsaved Scenario analysis is best described as the determination of the: Question 2 options: most likely outcome for a project. reasonable range of project outcomes. variable that has the greatest effect on a project's outcome. effect that a project's initial cost has on the project's net present value. change in a project's net present value given a stated change in projected sales. Question 3 (1.2 points) Question 3 Unsaved Which one of these has the least potential to increase the net present value of a proposed investment? Assume the project has a positive net present value in at least one set of circumstances. Question 3 options: Ability to wait until the economy improves before making the investment Ability to immediately shut down a project should the project become unprofitable Option to increase production beyond that initially projected Option to place the investment on hold until a more favorable discount rate becomes available Option to discontinue a project at the end of its intended life Question 4 (1.2 points) Question 4 Unsaved Burke's Corner currently sells blue jeans and T-shirts. Management is considering adding fleece tops to its inventory. The tops would sell for $49 each with expected sales of 3,200 tops annually. By adding the fleece tops, management feels the company will sell an additional 150 pairs of jeans at $79 a pair and 220 fewer T-shirts at $18 each. The variable cost per unit is $36 on the jeans, $7 on the T-shirts, and $21 on the fleece tops. The project's depreciation expense is $23,000 a year and the fixed costs are $21,000 annually. The tax rate is 34 percent. What is the project's operating cash flow? Question 4 options: $47,935.80 $52,201.20 $55,755.80 $43,209.90 $38,419.70 Question 5 (1.2 points) Question 5 Unsaved Scenario analysis: Question 5 options: determines the impact a $1 change in sales has on a project's internal rate of return. determines which variable has the greatest impact on a project's net present value. helps determine the reasonable range of expectations for a project's anticipated outcome. evaluates a project's net present value while sensitivity analysis evaluates a project's internal rate of return. determines the absolute worst and absolute best outcome that could ever occur. Question 6 (1.2 points) Question 6 Unsaved JL & Co. is contemplating the purchase of a new $428,000 computer-based order entry system. The system will be depreciated straight-line to zero over the project's six-year life. The pretax resale value is $215,000. The system will save $148,000 before taxes per year in order processing costs and will reduce working capital by $46,000 at the beginning of the project. Working capital will revert back to normal at the end of the project. If the tax rate is 34 percent, what is the IRR for this project? Question 6 options: 15.51 percent 22.79 percent 25.32 percent 31.08 percent 14.20 percent Question 7 (1.2 points) Question 7 Unsaved Which one of the following terms is most commonly used to describe the cash flows of a new project that are simply an offset of reduced cash flows for a current project? Question 7 options: Opportunity cost Sunk cost Erosion Replicated flows Pirated flows Question 8 (1.2 points) Question 8 Unsaved CrossTown Builders is considering remodeling an old building it currently owns. The building was purchased ten years ago for $1.2 million. Over the past ten years, the firm rented out the building and used the rent to pay off the mortgage. The building is now owned free and clear and has a current market value of $1.9 million. The company is considering remodeling the building into industrial-type apartments at an estimated cost of $1.6 million. The estimated present value of the future income from these apartments is $4.1 million. Which one of the following defines the opportunity cost of the remodeling project? Question 8 options: Present value of the future income Cost of the remodeling Current market value of the building Initial cost of the building plus the remodeling costs Current market value of the building plus the remodeling costs Question 9 (1.2 points) Question 9 Unsaved Your local athletic center is planning a $1.08 million expansion to its current facility. This cost will be depreciated on a straight-line basis over a 20-year period. The expanded area is expected to generate $489,000 in additional annual sales. Variable costs are 46 percent of sales, the annual fixed costs are $129,400, and the tax rate is 34 percent. What is the operating cash flow for the first year of this project? Question 9 options: $118,336.82 $92,509.15 $107,235.60 $106,666.67 $119,323.33 Question 10 (1.2 points) Question 10 Unsaved The net working capital invested in a project is generally: Question 10 options: a sunk cost. an opportunity cost. recouped in the first year of the project. recouped at the end of the project. depreciated to a zero balance over the life of the project Question 1 (1.2 points) Question 1 Unsaved The Golf Range is considering adding an additional driving range to its facility. The range would cost $229,000, would be depreciated on a straight-line basis over its seven-year life, and would have a zero salvage value. The anticipated revenue from the project is $62,500 a year with $18,400 of that amount being variable cost. The fixed cost would be $15,700. The firm believes that it will earn an additional $22,500 a year from its current operations should the driving range be added. The project will require $3,000 of net working capital, which is recoverable at the end of the project. What is the internal rate of return on this project at a tax rate of 34 percent? Question 1 options: 8.32 percent 8.68 percent 7.47 percent 11.09 percent 12.14 percent Question 2 (1.2 points) Question 2 Unsaved A cost-cutting project will decrease costs by $37,400 a year. The annual depreciation on the project's fixed assets will be $4,700 and the tax rate is 34 percent. What is the amount of the change in the firm's operating cash flow resulting from this project? Question 2 options: $21,582 $26,791 $25,805 $23,610 $26,282 Question 3 (1.2 points) Question 3 Unsaved Outdoor Sports is considering adding a miniature golf course to its facility. The course would cost $138,000, would be depreciated on a straightline basis over its five-year life, and would have a zero salvage value. The estimated income from the golfing fees would be $72,000 a year with $24,000 of that amount being variable cost. The fixed cost would be $11,600. In addition, the firm anticipates an additional $14,000 in revenue from its existing facilities if the golf course is added. The project will require $3,000 of net working capital, which is recoverable at the end of the project. What is the net present value of this project at a discount rate of 12 percent and a tax rate of 34 percent? Question 3 options: $11,309.11 $11,628.04 $12,737.26 $14,438.78 $14,900.41 Question 4 (1.2 points) Question 4 Unsaved Three years ago, Stock Tek purchased some five-year MACRS property for $82,600. Today, it is selling this property for $31,500. How much tax will the company owe on this sale if the tax rate is 34 percent? The MACRS allowance percentages are as follows, commencing with Year 1: 20.00, 32.00, 19.20, 11.52, 11.52, and 5.76 percent. Question 4 options: -$2,451.81 -$5,857.08 $0 $5,857.08 $2,621.81 Question 5 (1.2 points) Question 5 Unsaved Six years ago, China Exporters paid cash for a new packaging machine that cost $347,000. Three years ago, the firm spent $14,300 on repairs and modifications to the machine. The machine is now fully depreciated and has just sat idly in a back corner of the shop for the past seven months. The estimated value of the machine today is $157,500. The firm is considering using this machine in a new project. If it does so, what value should be assigned to this machine and included in the initial costs of the new project? Question 5 options: $0 $361,300 $157,500 $128,900 $171,800 Question 6 (1.2 points) Question 6 Unsaved Mike's Fish Market is implementing a project that will initially increase accounts payable by $6,100, increase inventory by $2,800, and decrease accounts receivable by $1,300. All net working capital will be recouped when the project terminates. What is the cash flow related to the net working capital for the last year of the project? Question 6 options: -$1,500 -$400 -$4,600 $1,500 $4,600 Question 7 (1.2 points) Question 7 Unsaved Newton Industries is considering a project and has developed the following estimates: unit sales = 4,800, price per unit = $67, variable cost per unit = $42, annual fixed costs = $11,900. The depreciation is $14,700 a year and the tax rate is 34 percent. What effect would an increase of $1 in the selling price have on the operating cash flow? Question 7 options: $3,168 $4,823 $1 $83,448 $82,368 Question 8 (1.2 points) Question 8 Unsaved Assume an all-equity firm has positive net earnings. The operating cash flow of this firm: Question 8 options: ignores both depreciation and taxes. is unaffected by the depreciation expense. must be negative. increases when the tax rate decreases. is equal to net income minus depreciation. Question 9 (1.2 points) Question 9 Unsaved The Green Tomato purchased a parcel of land six years ago for $389,900. At that time, the firm invested $128,000 grading the site so that it would be usable. Since the firm wasn't ready to use the site itself at that time, it decided to lease the land for $48,000 a year. The Green Tomato is now considering building a hotel on the site as the rental lease is expiring. The current value of the land is $415,000. The firm has no loans or mortgages secured by the property. What value should be included in the initial cost of the hotel project for the use of this land? Question 9 options: $0 $389,900 $415,000 $229,000 $101,900 Question 10 (1.2 points) Question 10 Unsaved Rocky Top, Inc., purchased some seven-year MACRS welding equipment six years ago at a cost of $73,000. Today, the company is selling this equipment for $25,000. The tax rate is 33 percent. What is the aftertax cash flow from this sale? The MACRS allowance percentages are as follows, commencing with Year 1: 14.29, 24.49, 17.49, 12.49, 8.93, 8.92, 8.93, and 4.46 percent. Question 10 options: $30,024.35 $16,152.25 $19,975.65 $31,075.75 $17,824.41 Question 1 (1.2 points) Question 1 Unsaved Which one of the following terms refers to the best option that was foregone when a particular investment is selected? Question 1 options: Side effect Erosion Sunk cost Opportunity cost Marginal cost Question 2 (1.2 points) Question 2 Unsaved You are analyzing a project and have developed the following estimates. The depreciation is $47,900 a year and the tax rate is 35 percent. What is the worst-case operating cash flow? Picture Question 2 options: -$2,545 $11,145 $88,855 $27,556 $61,095 Question 3 (1.2 points) Question 3 Unsaved Consider a three-year project with the following information: initial fixed asset investment = $347,600; straight-line depreciation to zero over the three-year life; zero salvage value; price per unit = $49.99; variable costs per unit = $30.82; fixed costs per year = $187,000; quantity sold per year = 65,500 units; tax rate = 35 percent. How sensitive is OCF to an increase of one unit in the quantity sold? Question 3 options: $12.46 $11.67 $8.67 $9.08 $13.40 Question 4 (1.2 points) Question 4 Unsaved The Tattle Teller has a printing press sitting idly in its back room. The press has no market value to another printer because the machine utilizes old technology. The firm could get $480 for the press as scrap metal. The press is six years old and originally cost $174,000. The current book value is $3,570. The president of the firm is considering a new project and feels he can use this press for that project. What value, if any, should be assigned to the press as an initial cost of the new project? Question 4 options: $0 $480 $3,570 $3,090 $4,050 Question 5 (1.2 points) Question 5 Unsaved A project has annual depreciation of $15,028, costs of $82,592, and sales of $138,765. The applicable tax rate is 34 percent. What is the operating cash flow according to the tax shield approach? Question 5 options: $21,540.09 $27,666.67 $27,157.02 $42,183.70 $39,878.84 Question 6 (1.2 points) Question 6 Unsaved The Sausage Hut is looking at a new sausage system with an installed cost of $187,400. This cost will be depreciated straight-line to zero over the project's four-year life, at the end of which the sausage system can be scrapped for $25,000. The sausage system will save the firm $69,000 per year in pretax operating costs, and the system requires an initial investment in net working capital of $9,000, which will be recouped at project end. If the tax rate is 34 percent and the discount rate is 12 percent, what is the NPV of this project? Question 6 options: $6,508.54 -$320.81 $560.24 $1,410.10 $8,211.15 Question 7 (1.2 points) Question 7 Unsaved A nine-year project is expected to generate annual revenues of $137,800, variable costs of $82,600, and fixed costs of $11,000. The annual depreciation is $23,500 and the tax rate is 34 percent. What is the annual operating cash flow? Question 7 options: $14,301 $13,662 $35,052 $36,506 $37,162 Question 8 (1.2 points) Question 8 Unsaved Any changes to a firm's projected future cash flows that are caused by adding a new project are referred to as: Question 8 options: eroded cash flows. deviated projections. incremental cash flows. directly impacted flows. opportunity cash flows. Question 9 (1.2 points) Question 9 Unsaved Boyertown Industrial Tools is considering a three-year project to improve its production efficiency. Buying a new machine press for $578,000 is estimated to result in $184,000 in annual pretax cost savings. The press falls in the MACRS five-year class, which has percentage rates starting with Year 1, of 20, 32, 19.20,11.52, 11.52, and 5.76. The salvage value at the end of the project of $162,000. The press also requires an initial investment in spare parts inventory of $19,000, along with an additional $1,500 in inventory for each succeeding year of the project. The inventory will all be recovered when the project ends. If the tax rate is 35 percent and the discount rate is 12 percent, should the company buy and install the machine press? Why or why not? Question 9 options: Yes; the NPV is $51,613.33 Yes; the NPV is $45,602.57 No; the NPV is -$22,311.09 No; the NPV is -$52,918.78 Yes; the NPV is $64,728.29 Save Question 10 (1.2 points) Question 10 Unsaved The ability to delay an investment: Question 10 options: is commonly referred to as the best-case scenario. is valuable provided there are conditions under which the investment will have a positive net present value. ensures that the investment will have an expected net present value that is positive. offsets the need to conduct sensitivity analysis. is referred to as the option to abandon. Question 1 (1.2 points) Question 1 Unsaved You are analyzing a project and have developed the following estimates. The depreciation is $17,340 a year and the tax rate is 34 percent. What is the best-case operating cash flow? Picture Question 1 options: $190,035.60 $172,695.60 $167,904.00 $173,799.60 $166,240.00 Question 2 (1.2 points) Question 2 Unsaved A cost that should be ignored when evaluating a project because that cost has already been incurred and cannot be recouped is referred to as a(n): Question 2 options: fixed cost. forgotten cost. variable cost. opportunity cost. sunk cost. Question 3 (1.2 points) Question 3 Unsaved A project has an initial requirement of $311,700 for fixed assets and $47,600 for net working capital. The fixed assets will be depreciated to a zero book value over the four-year life of the project and will be worthless at the end of the project. All of the net working capital will be recouped after four years. The expected annual operating cash flow is $108,315. What is the project's internal rate of return if the tax rate is 34 percent? Question 3 options: 12.06 percent 11.99 percent 10.69 percent 12.15 percent 10.87 percent Question 4 (1.2 points) Question 4 Unsaved You are analyzing a project and have developed the following estimates: unit sales = 2,600, price per unit = $109, variable cost per unit = $67, fixed costs per year = $38,000. The depreciation is $12,000 a year and the tax rate is 34 percent. What effect would the sale of one more unit have on the operating cash flow? Question 4 options: $24.18 $16.66 $13.10 $27.72 $15.70 Question 5 (1.2 points) Question 5 Unsaved When a firm faces hard rationing,: Question 5 options: all positive net present value projects will be accepted. each division within a firm will be allocated an amount for capital expenditures that will be less than the total value of its positive net present value projects. there will be no available funds for capital expenditures. the firm will fund only those projects that create value for its shareholders. the firm will finance only the projects that have the highest profitability index values. Question 6 (1.2 points) Question 6 UnsavedFloral Shoppes has a new project in mind that will increase accounts receivable by $19,000, decrease accounts payable by $4,000, increase fixed assets by $27,000, and decrease inventory by $2,000. What is the amount the firm should use as the initial cash flow attributable to net working capital when it analyzes this project? Question 6 options: -$25,000 -$17,000 -$21,000 -$12,000 -$52,000 Question 7 (1.2 points) Question 7 Unsaved Northern Companies has three separate divisions. Each year, the company determines the amount it can afford to spend in total for capital expenditures and then allocates one-third of that amount to each division. This allocation process is called: Question 7 options: soft rationing. hard rationing. opportunity cost allocation. divisional separation. strategic planning. Question 8 (1.2 points) Question 8 Unsaved The analysis of a new project should exclude: Question 8 options: tax effects. erosion effects. side effects. sunk costs. opportunity costs. Question 9 (1.2 points) Question 9 Unsaved Cinram Machines has the following estimates for its new gear assembly project: price = $1,870 per unit; variable costs = $949 per unit; fixed costs = $1.4 million; quantity = 42,000 units. Suppose the company believes all of its estimates are accurate only to within 3 percent. What value should the company use for its total variable costs when performing its best-case scenario analysis? Question 9 options: $38,578,064 $39,822,128 $38,216,051 $41,802,137 $40,864,538 Question 10 (1.2 points) Question 10 Unsaved British Metals is reviewing its current accounts to determine how a proposed project might affect the account balances. The firm estimates the project will initially require $81,000 in additional current assets and $57,000 in additional current liabilities. The firm also estimates the project will require an additional $8,000 a year in current assets in each of the first three of the four years of the project. How much net working capital will the firm recoup at the end of the project assuming that all net working capital can be recaptured? Question 10 options: $105,000 $24,000 $48,000 $68,000 $81,000 Question 1 (1.2 points) Question 1 Unsaved Thrill Rides is considering adding a new roller coaster to its amusement park. The addition is expected to increase its overall ticket sales. In particular, the company expects to sell more tickets for its current roller coaster and experience extremely high demand for its new coaster. Sales for its boat ride are expected to decline but food and beverage sales are expected to increase significantly. All of the following are side effects associated with the new roller coaster with the exception of the: Question 1 options: increased food sales. additional sales for the existing coaster. increased food costs. reduced sales for the boat ride. ticket sales for the new coaster. Question 2 (1.2 points) Question 2 Unsaved Lakeside Winery is considering expanding its winemaking operations. The expansion will require new equipment costing $708,000 that would be depreciated on a straight-line basis to a zero balance over the four-year life of the project. The equipment can be sold for $220,000 after the four years. The project requires $46,000 initially for net working capital, all of which will be recouped at the end of the project. The projected operating cash flow is $211,500 a year. What is the net present value of this project if the relevant discount rate is 13 percent and the tax rate is 34 percent? Question 2 options: -$7,632.77 -$8,309.18 -$10,747.11 $7,008.14 $1,309.54 Question 3 (1.2 points) Question 3 Unsaved A project costs $2.43 million and has no salvage value. Depreciation is straight-line to zero over the five-year life of the project. Sales are projected at 64,000 units per year, price per unit is $73.29, variable cost per unit is $42.93, and fixed costs are $623,000 per year. The tax rate is 35 percent, and the required rate of return is 11percent. What is the sensitivity of NPV to a 100-unit increase in the sales figure? Question 3 options: $9,198.40 $8,609.18 $8,097.40 $7,293.48 $7,557.12 Question 4 (1.2 points) Question 4 Unsaved Lake City Plastics currently produces plastic plates and silverware. The company is considering expanding its product offerings to include plastic serving trays. All of the following are relevant costs to this project with the exception of: Question 4 options: the cost of additional utilities required to operate the serving tray production operation. any change in the expected sales of plates and silverware gained from offering trays also. a percentage of the current operating overhead. the additional plastic raw materials that would be required. the cost to acquire the forms needed to mold the trays. Question 5 (1.2 points) Question 5 Unsaved Kite Flite is considering making and selling custom kites in two sizes. The small kites would be priced at $12 and the large kites would be $39. The variable cost per unit is $5 and $14, respectively. Jill, the owner, feels that she can sell 1,900 of the small kites and 1,400 of the large kites each year. The fixed costs would be only $1,890 a year and the tax rate is 34 percent. What is the annual operating cash flow if the annual depreciation expense is $380? Question 5 options: $26,064.12 $30,759.80 $29,848.20 $28,309.40 $30,630.60 Question 6 (1.2 points) Question 6 Unsaved A cost that should be ignored when evaluating a project because that cost has already been incurred and cannot be recouped is referred to as a(n): Question 6 options: fixed cost. forgotten cost. variable cost. opportunity cost. sunk cost. Question 7 (1.2 points) Question 7 Unsaved The Shoe Box is considering adding a new line of winter footwear to its product lineup. When analyzing the viability of this addition, the company should include all of the following in its analysis with the exception of: Question 7 options: any expected changes in the sales levels of current products caused by adding the new productline. cost of new display counters for the additional winter footwear. increased taxes from winter footwear profits. the research and development costs to produce the current winter footwear samples. the expected revenue from winter footwear sales. Question 8 (1.2 points) Question 8 Unsaved The net working capital invested in a project is generally: Question 8 options: a sunk cost. an opportunity cost. recouped in the first year of the project. recouped at the end of the project. depreciated to a zero balance over the life of the project. Question 9 (1.2 points) Question 9 Unsaved Your local athletic center is planning a $1.08 million expansion to its current facility. This cost will be depreciated on a straight-line basis over a 20-year period. The expanded area is expected to generate $489,000 in additional annual sales. Variable costs are 46 percent of sales, the annual fixed costs are $129,400, and the tax rate is 34 percent. What is the operating cash flow for the first year of this project? Question 9 options: $118,336.82 $92,509.15 $107,235.60 $106,666.67 $119,323.33 Question 10 (1.2 points) Question 10 Unsaved A project has an annual operating cash flow of $52,620. Initially, this four-year project required $5,160 in net working capital, which is recoverable when the project ends. The firm also spent $39,700 on equipment to start the project. This equipment will have a book value of $17,014 at the end of Year 4. What is the cash flow for Year 4 of the project if the equipment can be sold for $15,900 and the tax rate is 35 percent? Question 10 options: $63,749.90 $73,680.00 $74,069.90 $73,862.00 $73,290.10