Question 13.75 pts

Super Cool Pizza Company is evaluating a possible investment in a new machine. The investment will cost $150,000. all $150,000 of the cost is depreciable. The expected increase in EBDT in year 1 (based on the company making the investment) is $50,000. The company's tax rate is 35%. Assume the company uses the 5 year MACRS depreciation method (see below). Calculate the company's Net Cash Flow for Year 1 of the project.

5-Year MACRS depreciation schedule.

Yr1 .20; Yr2 .32; Yr3 .192; Yr4 .115; Yr5 .115; Yr6 .058

Group of answer choices

$30,000

$20,000

$43,000

$13,000

Flag question: Question 2Question 23.75 pts

Ben's Ice Cream Company is evaluating a possible investment in a new machine. The investment will cost $1 million. All $1 million of the cost is depreciable. The expected increase in EBDT in year 1 (based on the company making the investment) is $450,000. The company's tax rate is 35%. Assume the company uses the 5 year MACRS depreciation method (see below). Calculate the company's net cash flow for Year 1 of the project.

5-Year MACRS depreciation schedule.

Yr1 .20; Yr2 .32; Yr3 .192; Yr4 .115; Yr5 .115; Yr6 .058

Group of answer choices

$250,000

$450,000

$162,500

$362,500

Flag question: Question 3Question 33.75 pts

Cash that flows to a company only because of a planned investment is known as .

Group of answer choices

net investment cost inflow

net incremental cash flow

net cash outflow

net cash inflow

Flag question: Question 4Question 43.75 pts

Standard Painting Company is evaluating a possible investment in a new paint shop. The investment will cost $2 million. $1 million of the cost is depreciable. The expected increase in EBDT in year 1 (based on the company making the investment) is $500,000. The company's tax rate is 35%. Assume the company uses the 5 year MACRS depreciation method (see below). Calculate the company's net cash flow for year 1 of the project.

5-Year MACRS depreciation schedule.

Yr1 .20; Yr2 .32; Yr3 .192; Yr4 .115; Yr5 .115; Yr6 .058

Group of answer choices

$195,000

$395,000

$300,000

$200,000

Flag question: Question 5Question 53.75 pts

Depreciation is commonly identified as what type of expense?

Group of answer choices

Expense in arrears

Non-cash expense

Cash expense

Deferred expense

Flag question: Question 6Question 63.75 pts

Robbie's Rodeo Trailer Manufacturing and Sales is evaluating a possible investment in a new set of machines. The investment will cost $1 million. The company's tax rate is 35%. Robbie is planning on selling the old machines for $225,000. The book value of the old machines is $100,000. Calculate the net cost of the investment in the new machines.

Group of answer choices

$818,750

$775,000

$1,000,000

$43,750

Flag question: Question 7Question 73.75 pts

Select all the reasons that a company's cash flow might increase because of an investment in a new project.

Group of answer choices

Variable costs might decrease

Gross margins might increase

The company's operations may become more efficient overall, leading to cost savings

Sales might increase

Flag question: Question 8Question 83.75 pts

Why is cash flow considered a more accurate indicator of a project's benefit to a company than net income?

Group of answer choices

Net Income is often affected by non-cash expenses such as depreciation.

Because cash flow makes sure to account for existing revenues (prior to investment in the new project).

Cash flow is not considered a more accurate indicator than Net Income...this premise is false.

Because it specifically ignores non-cash expenses in its computation.