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
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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?
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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?
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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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