nsu fin5130 quiz 2 latest 2017 october

QUIZ 2 Question 1 A project requires $229 673 of equipment that is classified as 7year property. What is the depreciation expense in Year 5 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? Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example if your answer is $12.345 then enter as 12.35 in the answer box. Question 2 ABC Inc is considering the purchase of a new equipment. The equipment costs $16 227 and an additional $505 is needed to install it. The project will also require an initial $7 185 investment in net working capital. The equipment will be depreciated straight-line to zero over a five-year life. What is the project’s initial investment outlay? Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example if your answer is $12.345 then enter as 12.35 in the answer box. Question 3 ABC Inc is planning the purchase of a new equipment which will cost $20 063. The project is expected to last for 9 years. The equipment will have a book value of $2 943 at the end of Year 9. The increase in net working capital is expected to be $3 331 all of which will be recouped at the end of the project. The project is expected to have annual operating cash flows of $15 225. What is the Total Cash Flow in Year 9 of the project if the equipment can be sold for $6 825 and the tax rate is 30%? Note: In the last year of the project the Total Cash Flow = Operating Cash Flow Terminal Cash Flow Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example if your answer is $12.345 then enter as 12.35 in the answer box. Question 4 Which of the following calculates the effect on the NPV of changes in one output variable at a time? Scenario analysis Profitability Index Opportunity Analysis Sensitivity analysis Monte Caro Simulation Question 5 A project requires $416 328 of equipment that is classified as 7-year property. What is the book value of this asset at the end of 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? Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example if your answer is $12.345 then enter as 12.35 in the answer box. Question 6 ABC Company purchased $61 977 of equipment 5 years ago. The equipment is 7-year MACRS property. The firm is selling this equipment today for $8 746. What is the After-tax Salvage Value if the tax rate is 25 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. Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example if your answer is $12.345 then enter as 12.35 in the answer box. Question 7ABC Inc. is considering purchase of a new equipment. The sales are expected to be $870 012 and the total cash expenses are expected to be $461 986. The annual depreciation is $49 003 and the tax rate is 29.1%. What is the operating cash flow? Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example if your answer is $12.345 then enter as 12.35 in the answer box. Question 8 Which of the following cash flows are NOT considered in the calculation of the initial outlay for a capital investment proposal? Question 9 A project has an initial requirement of $243 330 for new equipment and $8 231 for net working capital. The installation costs to get the new equipment in working condition are 4 068. The fixed assets will be depreciated to a zero book value over the 5-year life of the project and have an estimated salvage value of $103 592. All of the net working capital will be recouped at the end of the project. The annual operating cash flow is $90 141 and the cost of capital is 10% What is the project’s NPV if the tax rate is 30%? Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example if your answer is $12.345 then enter as 12.35 in the answer box. Question 10 Interest Expense is a type of incremental cash flow that should be included in all capital-budgeting decisions. Selected Answer: True False Question 11 A project has an initial requirement of $239 627 for new equipment and $11 405 for net working capital. The installation costs are expected to be $16 625. The fixed assets will be depreciated to a zero book value over the 4-year life of the project and have an estimated salvage value of $75 165. All of the net working capital will be recouped at the end of the project. The annual operating cash flow is $72 444 and the cost of capital is 6% What is the project’s NPV if the tax rate is 29%? Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example if your answer is $12.345 then enter as 12.35 in the answer box. Question 12 ABC Company has a proposed project that will generate sales of 395 units annually at a selling price of $190 each. The fixed costs are $5 255 and the variable costs per unit are $70. The project requires $24 962 of equipment that will be depreciated on a straight-line basis to a zero book value over the 11-year life of the project. That is depreciation each year is $24 962/11. The tax rate is 31 percent. What is the operating cash flow? Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example if your answer is $12.345 then enter as 12.35 in the answer box. Question 13 ABC Inc is planning the purchase of new equipment that costs $173 786. The project is expected to last for 13 years. Each year the new project is expected to sell 154 units for $239 per unit. The variable costs are expected to $88 per unit and the fixed costs are expected to be $17 345. The equipment will be depreciated on a straight-line basis over the 13-year life of the project. That is the depreciation each year will be $173 786/13. Assuming a tax rate of 32% what is the operating cash flow? Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example if your answer is $12.345 then enter as 12.35 in the answer box. Question 14 ABC Inc. is considering purchase of a new equipment. The expected sales are expected to be $5 803 476. The annual cash operating expenses are expected to be $2 538 103. The annual depreciation is estimated to be $427 170 and the interest expense is estimated to be $134 420. If the tax rate is 38% what is the operating cash flow? Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example if your answer is $12.345 then enter as 12.35 in the answer box. Question 15 ABC Inc. is considering the purchase of new equipment. The annual sales are expected to be $767 136 the annual variable costs are expected to be $148 388 the annual fixed costs are expected to be $89 582 the annual depreciation expenses are expected to be $53 590. Assuming a tax rate of 39.4% what is the operating cash flow? Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example if your answer is $12.345 then enter as 12.35 in the answer box. Question 16 ABC Inc purchased some new machinery three years ago for $166 071. Today it is selling this machinery for $25 021. What is the After-tax Salvage Value of the new machinery? Assume that the tax rate is 39%. The MACRS allowance percentages are as follows starting with Year 1: 20.00 32.00 19.20 11.52 11.52 and 5.76 percent. Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example if your answer is $12.345 then enter as 12.35 in the answer box. Question 17 ABC Company purchased $72 135 of equipment 4 years ago. The equipment is 7-year MACRS property. The firm is selling this equipment today for $4 677. What is the After-tax Salvage Value if the tax rate is 24%? 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. Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example if your answer is $12.345 then enter as 12.35 in the answer box. Question 18 A project requires $68 423 of equipment that is classified as 7-year property. What is the book value of this asset at the end of year 5 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? Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example if your answer is $12.345 then enter as 12.35 in the answer box.