Question
The following details for a company have been provided: Initial investment $150,000 Initial investment in working capital $30,000 Estimated annual sales $160,000 Estimated annual cash
- The following details for a company have been provided:
Initial investment | $150,000 |
Initial investment in working capital | $30,000 |
Estimated annual sales | $160,000 |
Estimated annual cash operating expenses | $70,000 |
Repairs in year 3 | $25,000 |
Investments useful life / salvage value | 4 years; $0 salvage |
Discount rate | 18% |
Tax rate | 30% |
What is the total cash flows for Year 1 to be used in an NPV analysis?
$36,750 | ||
$30,750 | ||
$63,000 | ||
$74,250 |
2. Which of the following statements are true?
I. An unfavorable activity variance for revenue will result from an actual level of activity that is greater than the planned level of activity.
II. A favorable activity variance for rent expense will result from an actual level of activity that is less than the planned level of activity.
III. A favorable activity variance for revenue will result from an actual level of activity that is greater than the planned level of activity.
3.Which of the following combinations is accurate?
Combination | Capital Budgeting Technique | Utilizes Time Value of Money | Utilizes Cash Flows |
1 | Payback Method | No | Yes |
2 | Net Present Value Method | Yes | No |
3 | Internal Rate of Return | No | Yes |
4 | Simple Rate of Return | Yes | No |
Combination 1 | ||
Combination 2 | ||
Combination 3 | ||
Combination 4 |
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