Question

1. Firm A is considering a project that will require $28,000 in initial working capital and $87,000 in fixed assets. The project is expected to produce annual sales of $75,000 with associated cash costs of $57,000. The project has a 5-year life. The company uses straight-line depreciation to a zero book value over the life of the project. The tax rate is 30 %. What is the operating cash flow for this project? A.-$1,520 B.-$580 C. $420 E.$17,820 D.$15,680 2. A project has an initial outlay of $4000. It has a single payoff of $6996.46 at the end of year 4. The project's IRR is c. 21 % d. а. 16% b. 13% d. 15% e. none of the above 3. Given the following information of a project and a discount rate of 10 % p.a. Year O 2 -450 325 65 100 What is the NPV of the project? a. 457 с. -3 b. -33 d. -26 e. none of the above 4. Which one of the following will decrease the net present value of a project? A. increasing the value of each of the project's discounted cash inflows B. moving each of the cash inflows forward to a sooner time period C. decreasing the required discount rate D. increasing the project's initial cost at time zero E. Increasing the amount of the final cash inflow

Answer 1

1.
Depreciation = $87,000/5 = $17,400
EBT = Sales - costs - Depreciation
= $75,000 - $57,000 - $17,400
= $600.
Profit = EBT * (1 - tax rate)
= $600 * (1-0.30)
= $420.

Operating cash flow = Profit + depreciation
= $420 + $17,400
= $17820.

NOTE:As per HOMEWORKLIB RULES, only first question can be answered. Post the rest of the questions separately.