UNIT 8 Finance Quiz. 10 finance questions
1. Blanchford Enterprises is considering a project that has the following cash flow and WACC data. What is the project's NPV? Note that a project's projected NPV can be negative, in which case it will be rejected. WACC = 10%
Year: 0 1 2 3 4
Cash flows: -$1,000 $475 $475 $475 $475
Year: 0 1 2 3 4
Cash flows: -$1,000 $475 $475 $475 $475
2. Tapley Dental Associates is considering a project that has the following cash flow data. What is the project's payback?
3. Ryngaert Medical Enterprises is considering a project that has the following cash flow and WACC data. What is the project's NPV? Note that a project's projected NPV can be negative, in which case it will be rejected.
4. Rockmont Recreation Inc. is considering a project that has the following cash flow data. What is the project's IRR? Note that a project's projected IRR can be less than the WACC (and even negative), in which case it will be rejected.
5. As a member of Gamma Corporation's financial staff, you must estimate the Year 1 operating net cash flow for a proposed project with the following data. What is the Year 1 operating cash flow? Sales $33,000 Depreciation $10,000 Other operating costs $17,000 Interest expense $4,000 Tax rate 35% (Points: 4) $ 9,500 $10,600 $11,700 $12,800 $13,900
6. Delta Software is considering a new project whose data are shown below. The equipment that would be used has a 3-year tax life, after which it will be worthless, and it will be depreciated by the straight line method over 3 years. Revenues and other operating costs are expected to be constant over the project's 3-year life. What is the project's operating cash flow during Year 1? Equipment cost (depreciable basis) $75,000 Straight line depreciation rate 33.33% Sales $60,000 Operating costs excl. depr’n $25,000 Tax rate 35% (Points: 4) $27,000 $28,500 $30,000 $31,500 $33,000
7. Swannee Resorts is considering a new project whose data are shown below. The equipment that would be used has a 3-year tax life, would be depreciated by the straight line method over the project's 3 year life, and would have zero salvage value. No new working capital would be required. Revenues and other operating costs are expected to be constant over the project's 3-year life. What is the project's NPV? (Hint: Cash flows are constant in Years 1-3.) WACC 10% Net investment cost (depreciable basis) $65,000 Straight line depr™n rate 33.33% Sales revenues $70,000 Operating costs excl. depr™n $25,000 Tax rate 35% (Points: 4) $22,156.24 $23,791.14 $24,354.87 $25,189.71 $26,599.05
8. Big Air Services is now in the final year of a project. The equipment originally cost $20 million, of which 75% has been depreciated. Big Air can sell the used equipment today for $6 million, and its tax rate is 40%. What is the equipment’s after-tax net salvage value? (Points: 4) $500,000 $600,000 $700,000 $800,000 $900,000
9. You work for Alpha Inc., and you must estimate the Year 1 operating net cash flow for a proposed project with the following data. What is the Year 1 operating cash flow? Sales $11,000 Depreciation $4,000 Other operating costs $6,000 Tax rate 35% (Points: 4) $4,650 $4,800 $4,950 $5,100 $5,250
10. Your company, Beta Corporation, is considering a new project which you must analyze. Based on the following data, what is the project's Year 1 operating cash flow? Sales $22,000 Depreciation $8,000 Other operating costs $12,000 Tax rate 35% (Points: 4) $9,100 $9,200 $9,300 $9,400 $9,500
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