Peters Boats has sales of 760000 and a profit margin of 5 The annual

# Peters boats has sales of 760000 and a profit margin

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50. Peter's Boats has sales of \$760,000 and a profit margin of 5%. The annual depreciation expense is \$80,000. What is the amount of the operating cash flow if the company has no long-term debt? A. \$34,000B. \$86,400C. \$118,000D. \$120,400E. \$123,900 8-16
Chapter 08 - Making Capital Investment Decisions 51. Le Place has sales of \$440,000, depreciation of \$32,000, and net working capital of \$56,000. The firm has a tax rate of 34% and a profit margin of 5%. The firm has no interest expense. What is the amount of the operating cash flow? 52. Ben's Border Café is considering a project which will produce sales of \$16,000 and increase cash expenses by \$10,000. If the project is implemented, taxes will increase from \$23,000 to \$24,500 and depreciation will increase from \$4,000 to \$5,500. What is the amount of the operating cash flow using the top-down approach? 53. Ronnie's Coffee House is considering a project that will produce sales of \$7,000 and increase cash expenses by \$2,500. If the project is implemented, taxes will increase by \$1,400. The additional depreciation expense will be \$1,000. An initial cash outlay of \$3,000 isrequired for net working capital. What is the amount of the operating cash flow using the top-down approach? 8-17
Chapter 08 - Making Capital Investment Decisions 54. A project will increase sales by \$60,000 and cash expenses by \$51,000. The project will cost \$40,000 and be depreciated using straight-line depreciation to a zero book value over the 4-year life of the project. The company has a marginal tax rate of 35%. What is the operating cash flow of the project using the tax shield approach? A. \$5,850B. \$8,650C. \$9,350D. \$9,700E. \$10,350 55. A project will increase sales by \$140,000 and cash expenses by \$95,000. The project will cost \$200,000 and be depreciated using the straight-line method to a zero book value over the 5-year life of the project. The company has a marginal tax rate of 34%. What is the yearly value of the depreciation tax shield? 56. Sun Lee'sFurniture justpurchased some fixedassets classified as 5-year property forMACRS. The assetscost \$24,000. What isthe amount of thedepreciation expensefor the second year? 8-18
Chapter 08 - Making Capital Investment Decisions 57. You justpurchased someequipment that isclassified as 5-yearproperty for MACRS.The equipment cost\$67,600. What willthe book value of thisequipment be at theend of three yearsshould you decide toresell the equipmentat that point in time?

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• Spring '14
• KellyS.Haggard