One purpose of identifying all of the incremental cash flows related to a

# One purpose of identifying all of the incremental

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22. One purpose of identifying all of the incremental cash flows related to a proposed project is to: A. isolate the total sunk costs so they can be evaluated to determine if the project will add value to the firm.B.eliminate any cost which has previously been incurred so that it can be omitted from the analysis of the project.C. make each project appear as profitable as possible for the firm.D. include both the proposed and the current operations of a firm in the analysis of the project.E. identify any and all changes in the cash flows of the firm for the past year so they can be included in the analysis. 23. Which of the following are examples of an incremental cash flow?I. an increase in accounts receivableII. a decrease in net working capitalIII. an increase in taxesIV. a decrease in the cost of goods sold 24. The book value of an asset is primarily used to compute the: 25. The salvage value of an asset creates an after-tax cash inflow to the firm in an amount equal to the: 26. Kurt's Kabinets is looking at a project that will require \$80,000 in fixed assets and another \$20,000 in net working capital. The project is expected to produce sales of \$110,000 with associated costs of \$70,000. The project has a 4-year life. The company uses straight-line depreciation to a zero book value over the life of the project. The tax rate is 35%. What is the operating cash flow for this project? A. \$7,000B. \$13,000C. \$27,000D.\$33,000E. \$40,000Tax = .35 [\$110,000 - 70,000 - (\$80,000 4)] = \$7,000; OCF = \$110,000 - \$70,000 - \$7,000 = \$33,000 27. 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? OCF = (\$760,000 .05) + \$80,000 = \$118,00028. Le Place has sales of \$439,000, depreciation of \$32,000, and net working capital of \$56,000. The firm has a tax rate of 34% and a profit margin of 6%. The firm has no interest expense. Whatis the amount of the operating cash flow? OCF = (\$439,000 .06) + \$32,000 = \$58,340  #### You've reached the end of your free preview.

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