A 7-year project is expected to provide annual sales of $221,000 with costs of $97,500. The equipment necessary for the project will cost $360,000 and will be depreciated on a straight-line method over the life of the project. You feel that both sales and costs are accurate to +/-15 percent. The tax rate is 21 percent. What is the annual operating cash flow for the worst-case scenario? Multiple Choice O O $77,946 $44,504 $70,623

A 7-year project is expected to provide annual sales of $221,000 with costs of $97,500. The equipment necessary for the project will cost $360,000 and will be depreciated on a straight-line method over the life of the project. You feel that both sales and costs are accurate to +/-15 percent. The tax rate is 21 percent. What is the annual operating cash flow for the worst-case scenario? Multiple Choice O O $77,946 $44,504 $70,623

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Consider a project that will produce sales of $55,150 and have costs of $31,100. Taxes will be $5,400 and the depreciation expense will be $3,325. An initial cash outlay of $2,250 is required for net working capital. What is the project's operating cash flow?
A 7-year project is expected to provide annual sales of $221,000 with costs of $97,500. The equipment necessary for the project will cost $360,000 and will be depreciated on a straight-line method over the life of the project. You feel that both sales and costs are accurate to +/-15 percent. The tax rate is 35 percent. What is the annual operating cash flow for the worst-case scenario?
A 7-year project is expected to generate annual sales of 10,400 units at a price of $91 per unit and a variable cost of $62 per unit. The equipment necessary for the project will cost $437,000 and will be depreciated on a straight-line basis over the life of the project. Fixed costs are $265,000 per year and the tax rate is 21 percent. How sensitive is the operating cash flow to a $1 change in the per unit sales price? Multiple Choice O O $8,216 $6,084 $5,119 $5,361 $5,602
A project has annual NPV break-even level of sales of $3,000,000. The annual net cash flows can be calculated as (0.16 x sales- $392,000). The project has a 5-year life and the company's cost of capital is 8.70%. Ignoring the impact of depreciation and taxes, what is the most that should be invested in this project today? a. $229,980 b. $1,320,000 C. $440,000 d. $344,970 e. $880,000
A proposed new project has projected sales of $244,500, costs of $123,100, and depreciation of $15,100. The tax rate is 21%. What is the operating cash flow of this project?
A 5-year project is expected to generate annual sales of 8,800 units at a price of $75 per unit and a variable cost of $46 per unit. The equipment necessary for the project will cost $309,000 and will be depreciated on a straight-line basis over the life of the project. Fixed costs are $185,000 per year and the tax rate is 21 percent. How sensitive is the operating cash flow to a $1 change in the per unit sales price? Multiple Choice $3,254 $3,629 $6,952 $4,752 $4,003
Suppose you are considering an investment project that requires $800,000, has a six-year life, and has a salvage value of $100,000. Sales volume is projected to be 65,000 units per year. Price per unit is $63, variable cost per unit is $42, and fixed costs are $532,000 per year. The depreciation method is a five-year MACRS. The tax rate is 35% and you expect a 20% return on this investment.(a) Determine the break-even sales volume.(b) Calculate the cash flows of the base case over six years and its NPW.(c) lf the sales price per unit increases to $400, what is the required break-even volume?(d) Suppose the projections given for price, sales volume, variable costs, and fixed costs are all accurale to wi thin ± 15%. What would be the NPW figures of the best-case and worst-case scenarios?
Bennett Company has a potential new project that is expected to generate annual revenues of $261,200, with variable costs of $143,600, and fixed costs of $61,000. To finance the new project, the company will need to issue new debt that will have an annual interest expense of $24,000. The annual depreciation is $25,000 and the tax rate is 21 percent. What is the annual operating cash flow? Multiple Choice $42,600 $127,600 $81,600 $178,616 $49,964
2. A project costs $20,000, will be depreciated straight-line to zero over its 3 year life, and will required a net working capital investment of %5,000 up-front. The project generates OCF of $13,000. The fixed assets will be sold for $2,000 at the end of the project. If the firm has a tax rate of 34% and a required return of 12%, what is the project's NPV?
You are evaluating an investment project, which has a cost of $161,000 today and is expected to provide after-tax annual cash flows of $20,000 for seven years. In order to compute the MIRR, you are modifying the cash flows. Assuming the cost of capital is 9.1 percent, what is the terminal cash flow of the modified cash flows? Question 12 options: $173,074 $176,474 $178,474 $180,974 $182,874 $184,574
Bennett Company has a potential new project that is expected to generate annual revenues of $263,000, with variable costs of $144, 400, and fixed costs of $61,600. To finance the new project, the company will need to issue new debt that will have an annual interest expense of $25,000. The annual depreciation is $25,400 and the tax rate is 35 percent. What is the annual operating cash flow? Multiple Choice $127,490 $82,400 $180,212 $45,940 $40,890
We are evaluating a project that costs RM604,000, has an 8-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 55,000 units per year. Price per unit is RM36, variable cost per unit is RM17, and fixed costs are RM685,000 per year. The tax rate is 21 percent and we require a return of 15 percent on this project. (i) Calculate the base-case cash flow and NPV., (ii) Assume the sales figure increases to 56,000 units per year, calculate the sensitivity of NPV to changes in the sales figure?

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