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CH10AQZV7 - Chapter 10 Quiz A Student Name Round all...

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Chapter 10 Quiz A Student Name _________________________ Student ID ____________ Round all answers to whole dollars. ________ 1. Four years ago, Cheese Snacks, Inc. purchased land located beside their factory at a price of $739,000. The land is currently valued at $825,000. The company is now considering building a new warehouse on that land. The construction cost of the warehouse is estimated at $425,000. In addition, $35,000 worth of grading will be required to prepare the construction site. What is the initial cash outflow that should be used when analyzing this project? a. $1,164,000 b. $1,199,000 c. $1,250,000 d. $1,285,000 ________ 2. You are analyzing a proposed 3-year project. You expect to sell 11,500 units per year at an average selling price of $19.99 per unit. The initial cash outlay for fixed assets will be $120,000. These assets will be depreciated using straight-line depreciation to a zero book value over the life of the project. Fixed costs are expected to be $85,996 and variable costs should be $7.65 per unit. What is the expected operating cash flow if the tax rate is 35 percent? ________ 3. You just purchased some new equipment costing $685,000. The equipment is classified as 5-year property for MACRS. What is the book value of the equipment at the end of year 3? MACRS 5-year property Year Rate 1 20.00% 2 32.00% 3 19.20% 4 11.52% 5 11.52% 6 5.76% _______ 4. You purchased some fixed assets four years ago at a cost of $129,600. You have been depreciating these assets using straight-line depreciation to a zero book value over 7 years. Today, you are selling these assets for $74,900. What is the after-tax cash flow from this sale if the applicable tax rate is 34 percent? ________ 5. You are considering the purchase of a building that you plan to depreciate using straight-line depreciation over thirty years. The cost will be $628,900. What is the value of the annual depreciation tax shield if the tax rate is 34 percent? a. $7,128 b. $14,256 c. $18,709 d. $20,963 ________6. You need a metal cutting machine for your operations. Your current machine is worn out so you are trying to decide which one of two machines to buy as a replacement. Whichever machine you purchase will likewise be replaced after its useful life. Machine A costs $221,000 and costs $16,000 a year to operate over a 3-year life. Machine B costs $190,000 and costs $21,000 to operate over a 2-year life. Given this information, which one of the following statements is correct if the applicable discount rate is 9 percent? ________7. A proposed project is expected to increase accounts receivable by $12,000, decrease inventory by $7,000, and
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