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F.A7: Basic Test Bank For Finance
F.A7: Basic Test Bank For Finance
A8.2
Sales
Variable cost
Depreciation
Tax rate
$
$
$
OCF
Depr. tax shield
$
$
Projected sales
Costs
Depreciation
Tax rate
$
$
$
876,400
547,300
128,000
34%
260,726
43,520
96,000
49,000
4,500
35%
Sales
Variable costs
Depreciation
EBIT/EBT
Taxes (34%)
Net Income
876,400
547,300
128,000
201,100
68,374
132,726
OCF1 = EBT+Dep-Tax
$
32,125
OCF2 = NI + Dep
$
A8.3
A8.4
Sales
Variable costs
Depreciation
EBT
Taxes (35%)
Net Income
Costs
Pretax Salvage
Tax rate
Straight-Line Life
Project Life
$
$
468,000
72,000
35%
8
5
Asset investment
$ 4,200,000
Estimated annual sales$ 3,100,000
Costs
$ 990,000
Tax rate
35%
Straight-Line Life
3
A8.5
Required return
A8.6
Initial NWC
Pretax Salvage
A8.7
96,000
49,000
4,500
42,500
14,875
27,625
12%
$
$
300,000
210,000
NPV
281,701
Installation cost
Op. Cost Saving
Initial NWC
Pretax Salvage
Tax rate
Discount rate
Straight-Line Life
$
$
$
$
500,000
150,000
50,000
80,000
35%
11%
5
32,125
$
$
$
58,500
292,500
175,500
$108,225
OCF
NPV
$ 271,008.91
Year
0
1
2
3
1,861,500
Cash flow
$ (4,500,000)
$ 1,861,500
$ 1,861,500
$ 2,298,000
A8.8
A8.9
Initial investment
Pretax Salvage
Op. Cost Saving
W.C. Reduction
Tax rate
Straight-Line Life
$ 1,000,000
$ 100,000
$ 380,000
$ 150,000
35%
5
$
$
$
Initial investment
Pretax Salvage
Op. Cost Saving - 1
W.C. Reduction
Annual Dep. Exp.
Aftertax Salvage
Tax rate
Required return
Straight-Line Life
$ 1,000,000
$ 100,000
$ 400,000
$ 150,000
$ 200,000
$
65,000
35%
20%
5
Initial investment
Pretax Salvage
Op. Cost Saving - 2
W.C. Reduction
Annual Dep. Exp.
Aftertax Salvage
Tax rate
Required return
Straight-Line Life
$ 1,000,000
$ 100,000
$ 320,000
$ 150,000
$ 200,000
$
65,000
35%
20%
5
Year
0
1
2
3
4
5
200,000
65,000
317,000
$
$
$
$
$
$
IRR
NPV
Accept/Reject
NPV
Accept/Reject
Cost savings
Both cases:
Cash flow
(850,000)
317,000
317,000
317,000
317,000
232,000
23.49%
Year
0 $
1
2
3
4
5
$
Cash flow
(850,000)
330,000
330,000
330,000
330,000
245,000
102,742
Accept
Year
0 $
1
2
3
4
5
$
Cash flow
(850,000)
278,000
278,000
278,000
278,000
193,000
(52,769)
Reject
347,146