Use the following data to answer Questions through 14: Fool Proof Software is considering an expansion project that has a life of four years. The proposed project has the following features: Initial cost of the equipment is $200,000, with shipping cost of $10,000 and installation cost of $30,000. The company will also pay $25,000 for research purposes related to the equipment . The equipment will be depreciated over 4 years using MACRS at the following rates (33%, 45%, 15% and 7%). Inventories will increase by $25,000, and accounts payable will rise by $5,000 . The company will sell 100,000 units per year with a price of $2/unit. The company's total operating cost will equal to $120,000 each year At t=4, the equipment's salvage value is $25,000 The company's tax rate is 40% The project's WACC is 10% 1. The net working capital (NWC) equals: * A. $20,000 B. 30,000 C. $25,000 D. $5,000 E. None of the above 2. The base price of the equipment equals: * O A. $265,000 B. $230,000 C. $210,000 O D. $240,000 E. None of the above 3. What is the net cost of the equipment for capital budgeting purposes? A. $240,000 B. $260,000 C. $200,000 D. $230,000 E. None of the above 4. The depreciation expense for the 1st year is: A. $79,200 B. $87,450 C. $76,400 D. $65,000 E. None of the above 5. The depreciation expense for the 2nd year is: A. $119,250 B. $100,000 C. $96,000 D. $108,000 O E. None of the above 6. The depreciation expense for the 3rd year is: * A. $36,000 B. $96,000 C. $65,000 D. $39,750 E. None of the above 7. The depreciation expense for the 4th year is: - A $14,000 B. $16,800 C. $18,550 D. $16,000 E. None of the above 8. The after-tax Cash Flow for the 1st year is: A. $79,000 B. $79,680 C. $80,000 D. $79,640 E. None of the above 9. The after-tax Cash Flow for the 2nd year is: A. $91,200 B. $90,000 C. $91,400 D. $90,200 E. None of the above 10. The after-tax Cash Flow for the 3rd year is: - A. $62,300 B. $62,400 C. $61,000 D. $62,000 E. None of the above 11. The after-tax Cash Flow for the 4th year is: A. $54,720 B. $54,700 C. $54,740 D. $53,720 E. None of the above 12. The Book Value of the equipment at termination is: * A. $20,000 B. $0 C. $40,000 D. $240,000 E. None of the above 13. The Terminal Value (TV) is: * O A. $40,000 B. $30,000 C. $35,000 D. $25,000 E. None of the above 14. The NPV value of the project is:* O A.-$4,029.72 B. $23,679 C. $27,953.24 D. $30,420 O E. None of the above
