Question 1

Which of the following cash flows are NOT considered in the calculation of the initial outlay for a capital investment proposal?

	Interest expense related to financing a project
	Cost of Installing new equipment
	All of the above should be considered
	Equipment Cost
	Increase in net working capital requirements

1 points

Question 2

A project has an initial requirement of $169,755 for new equipment and $8,187 for net working capital. The fixed assets will be depreciated to a zero book value over the 3-year life of the project and have an estimated salvage value of $96,523. All of the net working capital will be recouped at the end of the project. The annual operating cash flow is $60,949 and the cost of capital is 11% What is the project's NPV if the tax rate is 35%?

Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

1 points

Question 3

A project requires $397,215 of equipment that is classified as 7-year property. What is the book value of this asset at the end of year 3 given the following MACRS depreciation allowances, starting with year one: 14.29, 24.49, 17.49, 12.49, 8.93, 8.92, 8.93, and 4.46 percent? Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

1 points

Question 4

Sunk costs are a type of incremental cash flow that should be included in all capital-budgeting decisions.

True

False

1 points

Question 5

A project requires $327,822 of equipment that is classified as 7-year property. What is the book value of this asset at the end of year 5 given the following MACRS depreciation allowances, starting with year one: 14.29, 24.49, 17.49, 12.49, 8.93, 8.92, 8.93, and 4.46 percent? Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

1 points

Question 6

ABC Inc. has estimated the following revenues and expenses related phase I of a proposed new housing development? Incremental sales= $545,408, total cash expenses $328,085, depreciation $67,525, taxes 25%. What are the operating cash flows?

Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

1 points

Question 7

ABC Company has the following projections for Year 1 of a capital budgeting project.

Year 1 Incremental Projections:

Sales $725,216

Variable Costs $43,172

Fixed Costs $89,807

Depreciation Expense $75,935

Tax Rate 27%

Calculate the operating cash flow for Year 1.

Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

1 points

Question 8

ABC Company has a proposed project that will generate sales of 425 units annually at a selling price of $171 each. The fixed costs are $6,602 and the variable costs per unit are $122. The project requires $28,022 of equipment that will be depreciated on a straight-line basis to a zero book value over the 4-year life of the project. That is, depreciation each year is $28,022/4. The salvage value of the fixed assets is $6,900 and the tax rate is 35 percent. What is the operating cash flow for year four?

Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

1 points

Question 9

ABC has a proposed project which will generate sales of 185 units at a selling price of $374 each. The fixed costs are $23,948 and the variable costs per unit are $21. The project requires $121,633 of machinery which will be depreciated on a straight-line basis over the 5-year life of the project. That is, depreciation each year is $121,633/5.The tax rate is 25%. What is the operating cash flow for year 5?

Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

1 points

Question 10

ABC Company purchased some new equipment 2 years ago for $229,472. Today, it is selling this equipment for $48,486. What is the aftertax cash flow from this sale if the tax rate is 29 percent? The MACRS allowance percentages are as follows, commencing with year one: 20.00, 32.00, 19.20, 11.52, 11.52, and 5.76 percent.

Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

1 points

Question 11

A project requires $46,489 of equipment that is classified as 7-year property. What is the depreciation expense in year 3 given the following MACRS depreciation allowances, starting with year one: 14.29, 24.49, 17.49, 12.49, 8.93, 8.92, 8.93, and 4.46 percent? Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

1 points

Question 12

ABC Company purchased $44,546 of equipment 5 years ago. The equipment is 7-year MACRS property. The firm is selling this equipment today for $9,123. What is the aftertax cash flow from this sale if the tax rate is 29 percent? The MACRS allowance percentages are as follows, commencing with year one: 14.29, 24.49, 17.49, 12.49, 8.93, 8.92, 8.93, and 4.46 percent.

Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

1 points

Question 13

ABC Inc. has estimated the following revenues and expenses related phase I of a proposed new housing development? Incremental sales= $6,877,793, total cash expenses $2,588,629, depreciation $306,087, taxes 37%, interest expense, $200,000. What are the operating cash flows?

Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

1 points

Question 14

A project has an initial requirement of $230,475 for new equipment and $9,710 for net working capital. The installation costs to get the new equipment in working condition are 13,913. The fixed assets will be depreciated to a zero book value over the 4-year life of the project and have an estimated salvage value of $91,115. All of the net working capital will be recouped at the end of the project. The annual operating cash flow is $115,732 and the cost of capital is 18% What is the project's NPV if the tax rate is 37%?

Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

1 points

Question 15

ABC Company purchased $21,400 of equipment 4 years ago. The equipment is 7-year MACRS property. The firm is selling this equipment today for $6,342. What is the aftertax cash flow from this sale if the tax rate is 25 percent? The MACRS allowance percentages are as follows, commencing with year one: 14.29, 24.49, 17.49, 12.49, 8.93, 8.92, 8.93, and 4.46 percent.

Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

1 points

Question 16

ABC Corporation is considering an expansion project. The necessary equipment could be purchased for $27,000 and shipping and installation costs are another $679. The project will also require an initial $3,360 investment in net working capital. The company's tax rate is 40%. What is the project's initial investment outlay?

Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

1 points

Question 17

The net working capital invested in a project is generally:

	recovered at the end of the project.
	a sunk cost.
	recovered at the start of the project.
	depreciated to a zero balance over the life of the project.
	an opportunity cost.

1 points

Question 18

A project has an annual operating cash flow of $18,685. Initially, this 4-year project required $2,917 in net working capital, which is recoverable when the project ends. The firm also spent $10,000 on equipment to start the project. This equipment will have a book value of $3,271 at the end of year 4. What is the total cash flow for year 4 of the project if the equipment can be sold for $5,331 and the tax rate is 28%?

Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

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Question 1 Which of the following cash flows are NOT considered in the calculation of the initial outlay for a capital investment proposal? Interest expense related to financing a project Cost of Installing new equipment All of the above should be considered Equipment Cost Increase in net working capital requirements 1 points Question 2 A project has an initial requirement of $169,755 for new equipment and $8,187 for net working capital. The fixed assets will be depreciated to a zero book value over the 3-year life of the project and have an estimated salvage value of $96,523. All of the net working capital will be recouped at the end of the project. The annual operating cash flow is $60,949 and the cost of capital is 11% What is the project's NPV if the tax rate is 35%? Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box. 1 points Question 3 A project requires $397,215 of equipment that is classified as 7-year property. What is the book value of this asset at the end of year 3 given the following MACRS depreciation allowances, starting with year one: 14.29, 24.49, 17.49, 12.49, 8.93, 8.92, 8.93, and 4.46 percent? Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box. 1 points Question 4 Sunk costs are a type of incremental cash flow that should be included in all capital-budgeting decisions. True False 1 points Question 5 A project requires $327,822 of equipment that is classified as 7-year property. What is the book value of this asset at the end of year 5 given the following MACRS depreciation allowances, starting with year one: 14.29, 24.49, 17.49, 12.49, 8.93, 8.92, 8.93, and 4.46 percent? Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box. 1 points Question 6 ABC Inc. has estimated the following revenues and expenses related phase I of a proposed new housing development? Incremental sales= $545,408, total cash expenses $328,085, depreciation $67,525, taxes 25%. What are the operating cash flows? Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box. 1 points Question 7 ABC Company has the following projections for Year 1 of a capital budgeting project. Year 1 Incremental Projections: Sales $725,216 Variable Costs $43,172 Fixed Costs $89,807 Depreciation Expense Tax Rate $75,935 27% Calculate the operating cash flow for Year 1. Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box. 1 points Question 8 ABC Company has a proposed project that will generate sales of 425 units annually at a selling price of $171 each. The fixed costs are $6,602 and the variable costs per unit are $122. The project requires $28,022 of equipment that will be depreciated on a straight-line basis to a zero book value over the 4year life of the project. That is, depreciation each year is $28,022/4. The salvage value of the fixed assets is $6,900 and the tax rate is 35 percent. What is the operating cash flow for year four? Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box. 1 points Question 9 ABC has a proposed project which will generate sales of 185 units at a selling price of $374 each. The fixed costs are $23,948 and the variable costs per unit are $21. The project requires $121,633 of machinery which will be depreciated on a straight-line basis over the 5-year life of the project. That is, depreciation each year is $121,633/5.The tax rate is 25%. What is the operating cash flow for year 5? Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box. 1 points Question 10 ABC Company purchased some new equipment 2 years ago for $229,472. Today, it is selling this equipment for $48,486. What is the aftertax cash flow from this sale if the tax rate is 29 percent? The MACRS allowance percentages are as follows, commencing with year one: 20.00, 32.00, 19.20, 11.52, 11.52, and 5.76 percent. Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box. 1 points Question 11 A project requires $46,489 of equipment that is classified as 7-year property. What is the depreciation expense in year 3 given the following MACRS depreciation allowances, starting with year one: 14.29, 24.49, 17.49, 12.49, 8.93, 8.92, 8.93, and 4.46 percent? Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box. 1 points Question 12 ABC Company purchased $44,546 of equipment 5 years ago. The equipment is 7-year MACRS property. The firm is selling this equipment today for $9,123. What is the aftertax cash flow from this sale if the tax rate is 29 percent? The MACRS allowance percentages are as follows, commencing with year one: 14.29, 24.49, 17.49, 12.49, 8.93, 8.92, 8.93, and 4.46 percent. Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box. 1 points Question 13 ABC Inc. has estimated the following revenues and expenses related phase I of a proposed new housing development? Incremental sales= $6,877,793, total cash expenses $2,588,629, depreciation $306,087, taxes 37%, interest expense, $200,000. What are the operating cash flows? Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box. 1 points Question 14 A project has an initial requirement of $230,475 for new equipment and $9,710 for net working capital. The installation costs to get the new equipment in working condition are 13,913. The fixed assets will be depreciated to a zero book value over the 4-year life of the project and have an estimated salvage value of $91,115. All of the net working capital will be recouped at the end of the project. The annual operating cash flow is $115,732 and the cost of capital is 18% What is the project's NPV if the tax rate is 37%? Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box. 1 points Question 15 ABC Company purchased $21,400 of equipment 4 years ago. The equipment is 7-year MACRS property. The firm is selling this equipment today for $6,342. What is the aftertax cash flow from this sale if the tax rate is 25 percent? The MACRS allowance percentages are as follows, commencing with year one: 14.29, 24.49, 17.49, 12.49, 8.93, 8.92, 8.93, and 4.46 percent. Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box. 1 points Question 16 ABC Corporation is considering an expansion project. The necessary equipment could be purchased for $27,000 and shipping and installation costs are another $679. The project will also require an initial $3,360 investment in net working capital. The company's tax rate is 40%. What is the project's initial investment outlay? Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box. 1 points Question 17 The net working capital invested in a project is generally: recovered at the end of the project. a sunk cost. recovered at the start of the project. depreciated to a zero balance over the life of the project. an opportunity cost. 1 points Question 18 A project has an annual operating cash flow of $18,685. Initially, this 4-year project required $2,917 in net working capital, which is recoverable when the project ends. The firm also spent $10,000 on equipment to start the project. This equipment will have a book value of $3,271 at the end of year 4. What is the total cash flow for year 4 of the project if the equipment can be sold for $5,331 and the tax rate is 28%? Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box. 1 points