公司理财精要第九章题库(5)

Chapter 09 - Making Capital Investment Decisions

66. A project has an annual operating cash flow of $43,700. Initially, this 4-year project

required $3,800 in net working capital, which is recoverable when the project ends. The firm also spent $21,500 on equipment to start the project. This equipment will have a book value of $4,300 at the end of year 4. What is the cash flow for year 4 of the project if the equipment can be sold for $5,400 and the tax rate is 34 percent? A. $51,724 B. $52,038 C. $52,526 D. $52,900 E. $43,100

67. The Outpost currently sells short leather jackets for $349 each. The firm is considering selling long coats also. The coats would sell for $689 each and the company expects to sell 900 a year. If the firm decides to carry the long coat, management feels that the sales of the short jacket will decline from 1,420 to 1,265 units. Variable costs on the jacket are $210 and $445 on the long coat. The fixed costs for this project are $42,000, depreciation is $11,000 a year, and the tax rate is 33 percent. What is the projected operating cash flow for this project? A. $108,187 B. $111,264 C. $112,212 D. $119,672 E. $120,418

68. Burke's Corner currently sells blue jeans and T-shirts. Management is considering adding fleece tops to its inventory to provide a cooler weather option. The tops would sell for $49 each with expected sales of 3,600 tops annually. By adding the fleece tops, management feels the firm will sell an additional 220 pairs of jeans at $59 a pair and 350 fewer T-shirts at $18 each. The variable cost per unit is $36 on the jeans, $9 on the T-shirts, and $21 on the fleece tops. With the new item, the depreciation expense is $27,000 a year and the fixed costs are $62,000 annually. The tax rate is 34 percent. What is the project's operating cash flow? A. $27,789 B. $34,708 C. $36,049 D. $38,419 E. $40,201

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Chapter 09 - Making Capital Investment Decisions

69. Hi Fliers is considering making and selling custom kites in two sizes. The small kites would be priced at $9 and the large kites would be $24. The variable cost per unit is $5 and $11,

respectively. Jill, the owner, feels that she can sell 2,600 of the small kites and 1,700 of the large kites each year. The fixed costs would only be $2,100 a year and the tax rate is 34 percent. What is the annual operating cash flow if the annual depreciation expense is $900? A. $20,064 B. $20,370 C. $20,848 D. $21,309 E. $21,414

70. A project has sales of $462,000, costs of $274,000, depreciation of $28,000, interest expense of $3,400, and a tax rate of 35 percent. What is the value of the depreciation tax shield? A. $9,800 B. $10,300 C. $10,650 D. $10,800 E. $11,350

71. A project will reduce costs by $34,000 but increase depreciation by $16,500. What is the operating cash flow of this project based on the tax shield approach if the tax rate is 35 percent? A. $5,775 B. $9,275 C. $15,625 D. $25,550 E. $27,875

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Chapter 09 - Making Capital Investment Decisions

72. A project has annual depreciation of $16,200, costs of $87,100, and sales of $123,000. The applicable tax rate is 34 percent. What is the operating cash flow according to the tax shield approach? A. $23,019 B. $27,667 C. $27,458 D. $29,202 E. $29,878

73. A project requires $336,000 of equipment that is classified as 7-year property. What is the depreciation expense in year 3 given the following MACRS depreciation allowances, starting with year one: 14.29, 24.49, 17.49, 12.49, 8.93, 8.92, 8.93, and 4.46 percent? A. $38,033 B. $41,267 C. $48,509 D. $58,766 E. $61,322

74. Better Berries has a new project that requires $869,000 of equipment. What is the depreciation in year 6 of this project if the equipment is classified as 7-year property for

MACRS purposes? The MACRS allowance percentages are as follows, commencing with year one: 14.29, 24.49, 17.49, 12.49, 8.93, 8.92, 8.93, and 4.46 percent. A. $17,294 B. $17,301 C. $32,988 D. $77,515 E. $77,602

75. What is the year two depreciation on equipment costing $164,000 if it is classified as 5-year property for MACRS purposes? The MACRS allowance percentages are as follows, commencing with year one: 20.00, 32.00, 19.20, 11.52, 11.52, and 5.76 percent. A. $37,620 B. $38,200 C. $41,984 D. $47,815 E. $52,480

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Chapter 09 - Making Capital Investment Decisions

76. Fast Cars is considering a project that requires $138,000 of fixed assets that are classified as 5-year property for MACRS. What is the book value of these assets at the end of year 3? The MACRS allowance percentages are as follows, commencing with year one: 20.00, 32.00, 19.20, 11.52, 11.52, and 5.76 percent. A. $34,210 B. $36,667 C. $39,744 D. $40,450 E. $41,504

77. Western Wear purchased some 3-year MACRS property 3 years ago. What is the current book value of this equipment if the original cost was $48,000? The MACRS allowance

percentages are as follows, commencing with year one: 33.33, 44.45, 14.81, and 7.41 percent. A. $0 B. $1,122 C. $3,557 D. $6,508 E. $8,886

78. Hunter's Paradise purchased $568,000 of equipment 4 years ago. The equipment is 7-year MACRS property. The firm is selling this equipment today for $199,500. What is the aftertax cash flow from this sale if the tax rate is 35 percent? The MACRS allowance percentages are as follows, commencing with year one: 14.29, 24.49, 17.49, 12.49, 8.93, 8.92, 8.93, and 4.46 percent. A. $186,630 B. $191,780 C. $198,410 D. $209,740 E. $216,610

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Chapter 09 - Making Capital Investment Decisions

79. Metal Makers, Inc. purchased some welding equipment 6 years ago at a cost of $579,000. Today, the company is selling this equipment for $110,000. The tax rate is 34 percent. What is the aftertax cash flow from this sale? The MACRS allowance percentages are as follows, commencing with year one: 14.29, 24.49, 17.49, 12.49, 8.93, 8.92, 8.93, and 4.46 percent. A. $81,380 B. $95,220 C. $98,960 D. $101,540 E. $110,000

80. Phil's Dinor purchased some new equipment 2 years ago for $89,500. Today, it is selling this equipment for $67,000. What is the aftertax cash flow from this sale if the tax rate is 35 percent? The MACRS allowance percentages are as follows, commencing with year one: 20.00, 32.00, 19.20, 11.52, 11.52, and 5.76 percent. A. $58,586 B. $63,421 C. $67,000 D. $70,938 E. $74,875

81. Three years ago, Hi Tek purchased some 5-year MACRS property for $67,400. Today, it is selling this property for $28,000. How much tax will the firm owe on this sale if the tax rate is 34 percent? The MACRS allowance percentages are as follows, commencing with year one: 20.00, 32.00, 19.20, 11.52, 11.52, and 5.76 percent. A. -$2,920 B. -$1,480 C. $0 D. $1,480 E. $2,920

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