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$9.00 Net cost/Net Cash flow/NPV - Negotiable Price
- From Business: General-Business , Economics: Financial-Markets
- Closed, but you can still post tutorials
- Due on Jan. 06, 2008
- Asked on Dec 20, 2007 at 3:04:59PM
Q:Net cost/Net Cash flow/NPV
Five questions based on the following information:
A potential investment will cost $120,000, with a further $30,000 required in modifications for use. The computer equipment falls into the MACRS 5-year class; a net increase in working capital of $12,000 is required. The equipment will not affect revenue, but will save the firm $45,000 per year (before taxes) in reduced set-up times and rework. The firm plans to sell the equipment after four years for $30,000. The firm's marginal corporate tax (federal and state) is 35%.
1. The net cost of the equipment in year zero is:
a. $120,000
b. $138,000
c. $150,000
d. $162,000
2. The net cash flow in year one is:
a. $29,250
b. $39,750
c. $40,590
d. $56,340
e. $75,000
3. The net operating cash flow in year four is:
a. $35,550
b. $36,034
c. $51,300
d. $52,050
e. $67,800
4. The net present value of the project is approximately:
a. ($23,200)
b. ($20,380)
c. $ 5,385
d. $17,385
e. $27,744
5. The investment project described in the information presented will be:
a. accepted because it has positive net present value.
b. rejected because if has a negative net present value.
