Exam4Review.pdf

# Year project a project b 0 46000 46000 1 25000 11000

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Year Project A Project B 0 -\$46,000 -\$46,000 1 \$25,000 \$11,000 2 \$18,000 \$19,000 3 \$16,000 \$32,000 a. Project A; because it pays back faster b. Project A; because it has the higher internal rate of return c. Project B; because it has the higher internal rate of return d. Project A; because it has the higher NPV e. Project B; because it has the higher NPV The Green Shingle purchased a parcel of land 6 years ago for \$299,500. Since the firm wasn’t ready to use the site itself at that time, it decided to lease the land for \$28,000 a year. The Green Shingle is now considering building a hotel on the site as the rental lease is expiring. The current value of the land is \$347,500. The firm has no loans or mortgages secured by the property but would need to spend \$64,000 to improve the land for construction. What value should be included in the initial cost of the hotel project for the use of this land? a. \$0 b. \$299,500 c. \$347,500 d. \$363,500 e. \$411,500 Rock Haven has a proposed project that will generate sales of 1,680 unites annually at a selling price of \$32 each. The fixed costs are \$12,700 and the variable cost per unit are \$5.95. The project requires \$28,000 of fixed assets that will be depreciated on a straight-line basis to a zero book value over the 4-year life of the project. The salvage value of the fixed assets is \$6,900 and the tax rate is 34 percent. What is the operating cash flow for year four? 22882.24

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Your local athletic center is planning a \$1.32 million expansion to its current facility. This cost will be depreciated on a single-line basis over a 20-year period. The expanded area us excepted to generate \$524,000 in additional annual sales. Variable costs are 48 percent of sales, the annual fixed costs are \$79,400, and the tax rate is 15 percent. What is the operating cash flow for the first year of this project? 174018 A new project will increase sales by \$48,500 a year, but no increase cash expenses. The annual depreciation on the project’s fixed assets will be \$12,300 and the tax rate is 40 percent. What is firm’s operating cash flow resulting from this project?
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