question 10

7. A project produces annual net income of $14,600, $18,700, and $23,500 over three years, respectively. The initial cost of the project is $310,800. This cost is depreciated straight-line to a zero book value over three years. What is the average accounting rate of return if the required discount rate is 9 percent? A 12.18% B. 14.29% C. 15.63% D. 17.67% 8. Rabinder Inc. is considering the installation of a new computer system that will cut annual operating costs by $11,001. The system will cost $48,000 to purchase and install. This system will belong in a 40% CCA class. What is the amount of the increase in earnings before interest and taxes in the first year for this project? A -$9,600 B. $1,000 C. $1,400 $11,000 E $20,600 9. A company has projected sales of $542,000. costs of S389 300, depreciation of $82,400, and a tax rate of 31%. What is the operating cash flow" $104,193 B $126,518 $128,798 D. $130.907 I. $152,700 10 You are evaluating a project for Widgets fac. You estimate the sales price of The Widgets to be $100 and sales volume to be 1,000 units in year 1, 1.250 units in year 2, and 1,325 units in Year 3. The project has a three year life. Variable costs amount to $225 per unit and fixed costs are $100 000 per year. The project requires an initial investment of $165.000 which is depreciated straight line to zero over the three year project life. The actual market value of the initial investment at the end of year 3 is $35,001. Initial net working capital investment is $75.000 and WC will maintain a level equal to 20% of sales each year thereafter. The tax rate 15 349 and the required return on the project is 1096 What 1 EBIT for the project in the first year $13200 $15.000 $20.000 $44.000 S2000