QUESTION 1- You place an order for 310 units of inventory at a unit price of $160. The supplier offers terms of 1 / 15, net 90.

c-1. If you dont take the discount, how much interest are you paying implicitly? (Omit "$" sign in your response.)

Implicit interest $

c-2. How many days credit are you receiving?

Days' credit days

QUESTION 2- Barn Yard Inc. is a wholesaler that stocks engine components and tests equipment for the commercial aircraft industry. A new customer has placed an order for eight high-bypass turbine engines, which increase fuel economy. The variable cost is $1.6 million per unit, and the credit price is $1.725 million each. Credit is extended for one period, and based on historical experience, payment for about one out of every 200 such orders is never collected. The required return is 1.8% per period.

c-1. Suppose that customers who dont default become repeat customers and place the same order every period forever. Further assume that repeat customers never default. What is the NPV per engine purchased on credit? (Do not round intermediate calculations. Enter the answer in dollars. Round the final answer to 2 decimal places. Omit "$" sign in your response. Negative answer should be indicated by a minus sign.)

NPV $ per unit

c-2. Assuming the customer becomes a repeat customer, what is the break-even probability of default? (Do not round intermediate calculations. Round the final answer to 2 decimal places.)

Break-even probability %

d. This part of the question is not part of your Connect assignment.

QUESTION 3- A new electronic process monitor costs $990,000. This cost could be depreciated at 30% per year (Class 10). The monitor would actually be worthless in five years. The new monitor would save $460,000 per year before taxes and operating costs. If we require a 15% return, what is the NPV of the purchase? Assume a tax rate of 40%. (Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response.)

NPV $

QUESTION 4- A new electronic process monitor costs $990,000. This cost could be depreciated at 30% per year (Class 10). The monitor would actually be worth $100,000 in five years. The new monitor would save $460,000 per year before taxes and operating costs. Suppose the new monitor requires us to increase net working capital by $47,200 when we buy it. If we require a 15% return, what is the NPV of the purchase? Assume a tax rate of 40%. (Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response.)

NPV $

QUESTION 5- Hubrey Home Inc. is considering a new three-year expansion project that requires an initial fixed asset investment of $4.2 million. The fixed asset falls into Class 10 for tax purposes (CCA rate of 30% per year), and at the end of the three years can be sold for a salvage value equal to its UCC. The project is estimated to generate $2,680,000 in annual sales, with costs of $849,000. If the tax rate is 35%, what is the OCF for each year of this project? (Enter the answers in dollars. Do not round your intermediate calculations. Round the final answers to 2 decimal places. Omit $ sign in your response.)

OCF1	$
OCF2	$
OCF3	$

QUESTION 6- Hubrey Home Inc. is considering a new three-year expansion project that requires an initial fixed asset investment of $3.9 million. The fixed asset falls into Class 10 for tax purposes (CCA rate of 30% per year), and at the end of the three years can be sold for a salvage value equal to its UCC. The project is estimated to generate $2,650,000 in annual sales, with costs of $840,000. The tax rate is 35% and the required return on the project is 12%. What is the project's NPV? (Enter the answer in dollars. Do not round your intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response.)

NPV $

QUESTION 7- Hubrey Home Inc. is considering a new three-year expansion project that requires an initial fixed asset investment of $3.9 million. The fixed asset falls into Class 10 for tax purposes (CCA rate of 30% per year), and at the end of the three years can be sold for a salvage value equal to its UCC. The project is estimated to generate $2,650,000 in annual sales, with costs of $840,000. The project requires an initial investment in net working capital of $300,000 and the fixed asset will have a market value of $210,000 at the end of the project. If the tax rate is 35%, what is the projects year 0 net cash flow? Year 1? Year 2? Year 3? (Enter the answers in dollars. Negative answers should be indicated by a minus sign. Omit $ sign in your response.)

Years	Cash Flow
Year 0	$
Year 1	$
Year 2	$
Year 3	$

If the required return is 12%, what is the project's NPV? (Enter the answer in dollars. Negative answer should be indicated by a minus sign. Do not round your intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response.)

NPV $

QUESTION 8- Fox Hollow Franks is looking at a new system with an installed cost of $540,000. This equipment is depreciated at a rate of 20% per year (Class 8) over the projects five-year life, at the end of which the sausage system can be sold for $80,000. The sausage system will save the firm $170,000 per year in pre-tax operating costs, and the system requires an initial investment in net working capital of $29,000. If the tax rate is 34% and the discount rate is 10%, what is the NPV of this project? (Do not round your intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response.)

NPV $

QUESTION 9- Your firm is contemplating the purchase of a new $425,000 computer-based order entry system. The PVCCATS is $91,209, and the machine will be worth $30,000 at the end of the five-year life of the system. You will save $130,000 before taxes per year in order-processing costs and you will be able to reduce working capital by $60,000 (this is a one-time reduction). If the tax rate is 35%, what is the IRR for this project? (Round the final answer to 2 decimal places.)

IRR %

QUESTION 10 -We have been requested by a large retailer to submit a bid for a new point-of-sale credit checking system. The system would be installed, by us, in 89 stores per year for three years. We would need to purchase $1,300,000 worth of specialized equipment. This will be depreciated at a 20% CCA rate. We will sell it in three years, at which time it will be worth about half of what we paid for it. Labour and material cost to install the system is about $96,000 per site. Finally, we need to invest $340,000 in working capital items. The relevant tax rate is 36%. What price per system should we bid if we require a 20% return on our investment? (Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response.)

Bid price $ per system

QUESTION 11- Lobo is a leading manufacturer of positronic brains, a key component in robots. The company is considering two alternative production methods. The costs and lives associated with each are:

Year	Method 1	Method 2
0		$	6,700			$	9,900
1			400				620
2			400				620
3			400				620
4							620

Assuming that Lobo will not replace the equipment when it wears out, what is the present value of both methods (r = 13%)? Ignore depreciation and taxes in answering. (Negative answers should be indicated by a minus sign. Do not round intermediate calculations. Round the final answers to 2 decimal places. Omit $ sign in your response.)

	Present value
Method 1	$
Method 2	$

Based on present value, which method should Lobo buy?

multiple choice 1

Method 1

Method 2

If Lobo is going to replace the equipment, what is the present value of both methods (r = 13%)? Ignore depreciation and taxes in answering. (Negative answers should be indicated by a minus sign. Do not round intermediate calculations. Round the final answers to 2 decimal places. Omit $ sign in your response.)

	Present value
Method 1	$
Method 2	$

Based on present value, which method should Lobo buy?

multiple choice 2

Method 1

Method 2

QUESTION 12- We project unit sales for a new household-use laser-guided cockroach search and destroy system as follows:

Year	Unit Sales
1	101,000
2	113,000
3	136,000
4	142,000
5	95,000

The new system will be priced to sell at $475 each.

The cockroach eradicator project will require $2,200,000 in net working capital to start, and total net working capital will rise to 15% of the change in sales. The variable cost per unit is $345, and total fixed costs are $2,500,000 per year. The equipment necessary to begin production will cost a total of $22 million. This equipment is mostly industrial machinery and thus qualifies for CCA at a rate of 20%. In five years, this equipment will actually be worth about 20% of its cost.

The relevant tax rate is 35%, and the required return is 17%. Based on these preliminary estimates, what is the NPV of the project? (Enter the answer in dollars. Do not round your intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response.)

NPV $

QUESTION 13- An officer for a large construction company is feeling nervous. The anxiety is caused by a new excavator just released onto the market. The new excavator makes the one purchased by the company a year ago obsolete. As a result, the market value for the companys excavator has dropped significantly, from $600,000 a year ago to $50,000 now. In ten years, it would be worth only $3,000. The new excavator costs only $950,000 and would increase operating revenues by $90,000 annually. The new equipment has a ten-year life and expected salvage value of $175,000. The tax rate is 35%, the CCA rate, 25% for both excavators, and the required rate of return for the company is 14%. What is the NPV of the new excavator? (Negative answer should be indicated by a minus sign. Do not round your intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response.)

NPV $

What should the officer do?

multiple choice

Replace the existing excavator.

Do not replace the existing excavator.