Question 1 Homework Unanswered A project requires initial asset investment of $2 million. The asset will last for 7 years, and will be depreciated for tax purposes at the CCA rate of 30%. The required return on this project is 15%, and the marginal corporate tax rate is 32%. Assuming that the asset will have a salvage value of $100,000 at the end of Year 7, what is the present value of the CCA tax shields from this project? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a $398,840.58 b $406,860.57 $390,820.59 $389,617.59 e $408,063.57 Question 2 Homework. Unanswered A new project will cost $100,000. It will yield new sales revenues of $496,000. It will increase annual variable costs by $416,000 and annual fixed costs by $15,000. The project will also require initial investment of $22,000 in net working capital. The project will last for three years, and depreciation will be straight-line to zero. Given that the required rate of return on this project is 18%, and the marginal corporate tax rate is 40%, what is the year 2 operating cash flow from this project? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a $47,333.33 b $52,333.33 $49,000 d $39,000 e $26,000 Question 3 Homework Unanswered Ajax Corporation is considering purchasing a machine with a useful life of 5 years and costs $55,000. The machine has annual maintenance costs of $1,000. Given a rate of 10%, calculate the machine's EAC. Ignore PVCCATS. Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. $11,739.18 b $11,758.16 $15,881.37 d $15,508.86 e $12,000.00 Question 4 Homework Unanswered Supper Corp. is evaluating new equipment that will cost $300,000. The new equipment will provide the company with annual before-tax savings of $100,000 for the next five years. The company can depreciate the asset at a CCA rate of 30%. The marginal corporate tax rate is 35% and the required rate of return is 10%. Should the company invest in this new equipment? The salvage value at the end of five years is zero. Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a Yes, the company should invest in the new equipment as the NPV is $21,571.59. Yes, the company should invest in the new equipment as the NPV is $13,219.32. No, the company should not invest in the new equipment as the NPV is -$92,152.01. No, the company should not invest in the new equipment as the NPV is -$53,598.86 e Yes, the company should invest in the new equipment as the NPV is $246,401.14
