Question 1

Sea Maters Inc. purchased a lot in Phenix City 6 years ago at a cost of $240,000. Today, that lot has a market value of $490,000. At the time of the purchase, the company spent $9,000 to improve the site for a future use. The company now wants to build a new facility on that site. The actual contruction cost is estimated at $1.3 million. What amount should be used as the initial cash outflow for this project? Put a positive dollar amount, and round it to a whole dollar, e.g., 123,456.

Question 2

The Fluffy Feather sells customized handbags. Currently, it sells 21,000 handbags annually at an average price of $91 each. It is considering adding a lower-priced line of handbags that sell for $55 each. The firm estimates it can sell 18,000 of the lower-priced handbags but will sell 6,000 less of the higher-priced handbags by doing so. The amount of the sales that should be used when evaluating the addition of the lower-priced handbags is $____________. (Do not include the dollar sign ($). Round it to a whole dollar, e.g., $1,234,567.)

Question 3

Marie's Fashions is considering a project that will require $30,000 in net working capital and $88,000 in fixed assets. The project is expected to produce annual sales of $93,000 with associated costs of $57,000. The project has a 5-year life. The company uses straight-line depreciation to a zero book value over the life of the project. The tax rate is 31 percent. Calculate operating cash flow. (Do not include the dollar signs ($). Round your answers to the nearest whole dollar amount. (e.g., 32))

Question 4

You just purchased some equipment that is classified as 5-year property for MACRS. The equipment cost $164,000. What will the book value of this equipment be at the end of 4 years should you decide to resell the equipment at that point in time? Do not include the $ sign, and round it to a whole dollar.

MACRS 5-year property

Year	Rate
1	20.00%
2	32.00%
3	19.20%
4	11.52%
5	11.52%
6	5.76%

Question 5

The Lumber Yard is considering adding a new product line that is expected to increase annual sales by $265,000 and cash expenses by $135,000. The initial investment will require $98,000 in fixed assets that will be depreciated using the 5-year MACRS. The company has a marginal tax rate of 31 percent. What is the project OCF in year 2? (Do not include the dollar sign ($). Round your answer to a whole dollar. (e.g., 4,132)

MACRS 5-year property
Year	Rate
1	20.00%
2	32.00%
3	19.20%
4	11.52%
5	11.52%
6	5.76%

Question 6

Crafter's Supply purchased some fixed assets 3 years ago at a cost of $47,000. It no longer needs these assets so it is going to sell them today for $28,000. The assets are classified as 5-year property for MACRS. What is the after-tax cash flow from this sale if the firm's tax rate is 36 percent? Do not include the dollar sign ($). Round your answer to a whole dollar. (e.g., 4,132)

MACRS 5-year property
Year	Rate
1	20.00%
2	32.00%
3	19.20%
4	11.52%
5	11.52%
6	5.76%