公司理财精要第九章题库(4)

Chapter 09 - Making Capital Investment Decisions

51. The Tattler has a printing press sitting idly in its back room. The press has no market value to another printer because the machine utilizes old technology. The firm could get $125 for the press as scrap metal. The press is 6 years old and originally cost $148,000. The current book value is $2,370. The president of the firm is considering a new project and feels he can use this press for that project. What value, if any, should be assigned to the press as an initial cost of the new project? A. $0 B. $125 C. $2,245 D. $2,370 E. $2,495

52. Waterfront Shirts is a specialty retailer offering T-shirts, sweatshirts, and caps. Its most recent annual sales consisted of $14,000 of T-shirts, $11,000 of sweatshirts, and $1,300 of caps. The company is adding polo shirts to the line-up and projects that this addition will result in sales next year of $12,000 of T-shirts, $8,000 of sweatshirts, $7,800 of polo shirts, and $1,300 of caps. What sales amount should be used when evaluating the Polo shirt project? A. $0 B. $2,800 C. $4,400 D. $5,000 E. $9,100

53. Great Woods sells specialty equipment for mountain climbers. Its sales for last year included $238,000 of tents and $411,000 of climbing gear. For next year, management has decided to sell specialty sleeping bags also. As a result of this change, sales projections for next year are $254,000 of tents, $426,000 of climbing gear, and $51,000 of sleeping bags. How much of next year's sales are derived from the side effects of adding the new product to its sales offerings? A. $0

B. $15,500 C. $31,000 D. $51,000 E. $82,000

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Chapter 09 - Making Capital Investment Decisions

54. Glass Blowers, Inc. has a new project in mind that will increase accounts receivable by $18,000, decrease accounts payable by $6,000, increase fixed assets by $36,000, and decrease inventory by $11,000. What is the amount the firm should use as the initial cash flow attributable to net working capital when it analyzes this project? A. -$45,000 B. -$37,000 C. -$13,000 D. -$9,000 E. -$1,000

55. Browning's Motor Works is reviewing its current accounts to determine how a proposed project might affect the account balances. The firm estimates the project will initially require $57,000 in additional current assets and $32,000 in additional current liabilities. The firm also estimates the project will require an additional $7,000 a year in current assets for each one of the four years of the project. How much net working capital will the firm recoup at the end of the project assuming that all net working capital can be recaptured? A. -$85,000 B. $25,000 C. $53,000 D. $28,000 E. $85,000

56. Aaron's Market is implementing a project that will initially increase accounts payable by $3,600, increase inventory by $4,800, and decrease accounts receivable by $800. All net

working capital will be recouped when the project terminates. What is the cash flow related to the net working capital for the last year of the project? A. -$2,000 B. -$400 C. $400 D. $1,200 E. $2,000

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Chapter 09 - Making Capital Investment Decisions

57. Ed's Hardware is adding a new product line to its sales lineup. Initially, the firm will stock $31,000 of the new inventory, which will be purchased on 30-days credit from a supplier. The firm will also invest $6,000 in accounts receivable and $4,000 in equipment. What amount should be included in the initial project costs for net working capital? A. -$41,000 B. -$37,000 C. -$10,000 D. -$6,000 E. -$2,000

58. A 9-year project is expected to generate annual revenues of $114,500, variable costs of $73,600, and fixed costs of $14,000. The annual depreciation is $3,500 and the tax rate is 34 percent. What is the annual operating cash flow? A. $14,301 B. $14,788 C. $15,052 D. $17,506 E. $18,944

59. A debt-free firm has net income of $128,400, taxes of $46,200, and depreciation of $21,300. What is the operating cash flow? A. $82,200 B. $103,500 C. $107,100 D. $149,700 E. $195,900

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Chapter 09 - Making Capital Investment Decisions

60. Rock Haven has a proposed project that will generate sales of 1,680 units annually at a selling price of $22 each. The fixed costs are $12,700 and the variable costs per unit are $5.95. The project requires $28,000 of fixed assets that will be depreciated on a straight-line basis to a zero book value over the 4-year life of the project. The salvage value of the fixed assets is $6,900 and the tax rate is 34 percent. What is the operating cash flow for year four? A. $11,794 B. $12,417 C. $14,258 D. $16,348 E. $16,971

61. Your local athletic center is planning a $1.23 million expansion to its current facility. This cost will be depreciated on a straight-line basis over a 20-year period. The expanded area is expected to generate $524,000 in additional annual sales. Variable costs are 48 percent of sales, the annual fixed costs are $79,400, and the tax rate is 35 percent. What is the operating cash flow for the first year of this project? A. $118,336 B. $122,509 C. $147,027 D. $166,667 E. $219,323

62. A cost-cutting project will decrease costs by $48,500 a year. The annual depreciation on the project's fixed assets will be $11,300 and the tax rate is 34 percent. What is the amount of the change in the firm's operating cash flow resulting from this project? A. $24,552 B. $26,791 C. $25,805 D. $32,333 E. $35,852

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Chapter 09 - Making Capital Investment Decisions

63. An all-equity firm has net income of $27,300, depreciation of $7,400, and taxes of $2,050. What is the firm's operating cash flow? A. $17,850 B. $21,950 C. $29,350 D. $34,700 E. $36,750

64. The Blue Lagoon is considering a project with a five-year life. The project requires

$110,000 of fixed assets that are classified as five-year property for MACRS. Variable costs equal 71 percent of sales, fixed costs are $9,600, and the tax rate is 35 percent. What is the operating cash flow for year 4 given the following sales estimates and MACRS depreciation allowance percentages?

A. -$1,806 B. $640 C. $1,809 D. $2,342 E. $2,811

65. A new project you are considering is expected to generate an operating cash flow of $48,210 and will initially free up $21,630 in net working capital. Purchases of fixed assets costing $67,800 will be required to start up the project. What is the total cash flow for this project at time zero? A. -$67,800 B. -$46,170 C. -$1,040 D. -$26,580 E. -$41,220

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