Question

22. An all-equity firm has net ind um has net income of $ 200 deration of $7.500, and taxes of $2,050. What is the firm's operating cash flow! A) $17.850 B) $21.950 C) $26,250 D) $35,800 E) $36,750 23. year project is expected to generate annual revenues of $114,500, variable, costs of $73,600, and fixed costs of $14,000. The annual depreciation is $3,500 and the tax rate is 34 percent. What is the annual operating cash flow? B) C) $14,301 $14.788 $15,052 $17,506 $18,944 D) E) Suppose you purchase a machine for $10,000. The cost is depreciated straight-ling to a salvage value of $0 over its 4 year life. If the machine is sold at the end of the third year for $4,000, what are the after-tax proceeds from the sale assuming the tax rate is 34%? A) B) C) $1,010 $2,510 $3,010 $3,490 $4,990 D) E) A project has an annual operating cash flow of $45,000. Initially, this four-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) $53,826 D) $53,862 E) $53,900

Answer 1

22 Net income = $28,300 Depreciation = $7,500 Taxes = $2,050 Since it is all equity firm, there is no interest expenses in this case. Operating cash flows = Net income + Non cash expenses +(-) Changes in working capital = $28.300 + $7,500+ 0 = $35,800

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