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$6.00 Project cash flows / cost of capital - Negotiable
- From Business: General-Business , Economics: General-Economics
- Closed, but you can still post tutorials
- Due on Jan. 06, 2008
- Asked on Dec 20, 2007 at 2:54:52PM
Q:Three questions based on the following information:
The following information has been gathered on a project:
Equipment purchase price $ 80,000
Increase in net working capital $ 4,000
Salvage value $ 12,000
Marginal Tax Rate 40%
The equipment automates a section of product assembly and is expected to reduce labor costs by $15,000 (operating costs) per year over its 5 year life; it is not expected to affect the firm's revenues. The firm depreciates assets according to MACRS.
1. Operating cash flow in year 3 is:
a. $15,400
b. $15,080
c. $30,200
d. $24,200
2. The total non-operating terminal cash flow at the end of year five is:
a. $11,200
b. $ 9,120
c. $ 7,200
d. $13,120
3. If the assets cost of capital is 12%, then the NPV of the project is:
a. $65,668.56
b. $24,927,45
c. ($21,469.91)
d. ($24,927.45)
