practice questions for busi408 final nosol

practice questions for busi408 final nosol - practice...

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practice questions for final Student: ___________________________________________________________________________ 1. This chapter introduced three new methods for calculating project operating cash flow (OCF). Under what circumstances is each method appropriate? 2. Your firm purchased a warehouse for $335,000 six years ago. Four years ago, repairs were made to the building which cost $60,000. The annual taxes on the property are $20,000. The warehouse has a current book value of $268,000 and a market value of $295,000. The warehouse is totally paid for and solely owned by your firm. If the company decides to assign this warehouse to a new project, what value, if any, should be included in the initial cash flow of the project for this building? A. $0 B. $268,000 C. $295,000 D. $395,000 E. $515,000 &
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3. You own a house that you rent for $1,200 a month. The maintenance expenses on the house average $200 a month. The house cost $89,000 when you purchased it several years ago. A recent appraisal on the house valued it at $210,000. The annual property taxes are $5,000. If you sell the house you will incur $20,000 in expenses. You are deciding whether to sell the house or convert it for your own use as a professional office. What value should you place on this house when analyzing the option of using it as a professional office? A. $89,000 B. $120,000 C. $185,000 D. $190,000 E. $210,000 4. Big Joe's owns a manufacturing facility that is currently sitting idle. The facility is located on a piece of land that originally cost $129,000. The facility itself cost $650,000 to build. As of now, the book value of the land and the facility are $129,000 and $186,500, respectively. Big Joe's received an offer of $590,000 for the land and facility last week. The firm rejected this offer even though it was told that it is a reasonable offer in today's market. If Big Joe's were to consider using this land and facility in a new project, what cost, if any, should it include in the project analysis? A. $0 B. $315,500 C. $590,000 D. $650,000 E. $779,000 5. The most valuable investment given up if an alternative investment is chosen is a(n): A. salvage value expense. B. net working capital expense. C. sunk cost. D. opportunity cost. E. erosion cost. &
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6. A project is expected to create operating cash flows of $22,500 a year for three years. The initial cost of the fixed assets is $50,000. These assets will be worthless at the end of the project. An additional $3,000 of net working capital will be required throughout the life of the project. What is the project's net present value if the required rate of return is 10%? A. $2,208.11 B. $2,954.17 C. $4,306.09 D. $5,208.11 E. $5,954.17 7. A project will produce operating cash flows of $45,000 a year for four years. During the life of the project, inventory will be lowered by $30,000 and accounts receivable will increase by $15,000. Accounts payable will decrease by $10,000. The project requires the purchase of equipment at an initial cost of $120,000. The equipment will be depreciated straight-line to a
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practice questions for busi408 final nosol - practice...

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