QUESTION:7 [QUESTION BANK ID:269479] CORRECT Foley Systems is considering a new investment whose data are shown below. The equipment would be depreciated on a straight-line basis over the project’s 3-year life, would have a zero salvage value, and would require some additional working capital that would be recovered at the end of the project’s life. Revenues and other operating costs are expected to be constant over the project’s life. What is the project’s NPV? (Hint: Cash flows are constant in Years 1 to 3.) TYPE:MULTIPLE CHOICE

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Sales revenues, each year$75,000 Operating costs (excl. deprec.), each year$25,000 Tax rate35.0% << HIDE ANSWERS B C D E

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QUESTION:8 [QUESTION BANK ID:269634] CORRECT Dentaltech Inc. projects the following data for the coming year. If the firm follows the residual dividend policy and also maintains its target capital structure, what will its payout ratio be? EBIT$2,000,000Capital budget$850,000 Interest rate10%% Debt40% Debt outstanding$5,000,000% Equity60% Shares outstanding$5,000,000Tax rate40% TYPE:MULTIPLE CHOICE << HIDE ANSWERS