Question

A project with a life of 7 years is expected to provide annual sales of $350,000 and costs of $245,000. The project will require an investment in equipment of $625,000, which will be depreciated on a straight-line method over the life of the project. You feel that both sales and costs are accurate to +/-10 percent. The tax rate is 35 percent. What is the annual operating cash flow for the best-case scenario?

$106,925

$88,825

$138,175

$60,825

$113,500

Answer #1

Best Case
Scenario |
|||||

Sales Increase by
10% |
|||||

Costs Decrease by
10% |
|||||

Statement Computing Operating
Cash Flows |
In $ |
||||

Sales |
385000.00 |
(350000*1.10) |
|||

Less |
Costs |
220500.00 |
(245000*0.90) |
||

Less |
Depreciation |
89285.71 |
(625000/7) |
||

EBT |
75214.29 |
||||

Less |
Tax@35% |
26325.00 |
|||

EAT |
48889.29 |
||||

Add |
Depreciation |
89285.71 |
|||

Operating Cash
Flows |
138175.00 |
||||

Hence the Correct answer is C.
$138175 |

A project with a life of 6 years is expected to provide annual
sales of $340,000 and costs of $237,000. The project will require
an investment in equipment of $610,000, which will be depreciated
on a straight-line method over the life of the project. You feel
that both sales and costs are accurate to +/-15 percent. The tax
rate is 34 percent. What is the annual operating cash flow for the
best-case scenario?

A project with a life of 9 years is expected to provide annual
sales of $330,000 and costs of $229,000. The project will require
an investment in equipment of $595,000, which will be depreciated
on a straight-line method over the life of the project. You feel
that both sales and costs are accurate to +/-10 percent. The tax
rate is 40 percent. What is the annual operating cash flow for the
best-case scenario?
Multiple Choice
$94,140
$104,894
$120,584
$89,204
$53,504

A 7-year project is expected to provide annual sales of $217,000
with costs of $97,000. The equipment necessary for the project will
cost $355,000 and will be depreciated on a straight-line method
over the life of the project. You feel that both sales and costs
are accurate to +/-10 percent. The tax rate is 34 percent. What is
the annual operating cash flow for the worst-case scenario?

A 7-year project is expected to provide annual sales of $169,000
with costs of $91,000. The equipment necessary for the project will
cost $295,000 and will be depreciated on a straight-line method
over the life of the project. You feel that both sales and costs
are accurate to +/-10 percent. The tax rate is 34 percent. What is
the annual operating cash flow for the worst-case scenario?
Multiple Choice
$49,689
$32,009
$34,320
$82,969
$48,649

Pasha Entertainment is evaluating a new project that will have a
life of 5 years. This project is estimated to generate sales of
$250,000 each year. The annual costs are estimated to be $165,000.
At Time 0, Pasha will need to invest $475,000 in new fixed assets.
This will be depreciated on a straight-line method over the life of
the project with no salvage value. Management has indicated that
the sales and costs for this project are accurate within a...

A 9-year project is expected to generate annual sales of 8700
units at a price of $74 per unit and a variable cost of $45 per
unit. The equipment necessary for the project will cost $301,000
and will be depreciated on a straight-line basis over the life of
the project. Fixed costs are $180,000 per year and the tax rate is
35 percent. How sensitive is the operating cash flow to a $1 change
in the per unit sales price?...

Jefferson & Sons is evaluating a project that will increase
annual sales by $150,000 and annual cash costs by $90,000. The
project will initially require $100,000 in fixed assets that will
be depreciated straight-line to a
zero book value over the 5-year life of the project. The
applicable tax rate is 40 percent. What is the operating cash flow
for this project?
a.
$11,220
( )
b.
$29,920
( )
c.
$44,000
( )
d.
$46,480
( )
e.
$46,620

We are evaluating a project that costs $106869, has a seven-year
life, and has no salvage value. Assume that depreciation is
straight-line to zero over the life of the project. Sales are
projected at 4092 units per year. Price per unit is $55, variable
cost per unit is $29, and fixed costs are $82782 per year. The tax
rate is 38 percent, and we require a 9 percent return on this
project. Suppose the projections given for price, quantity,
variable...

We are evaluating a project that costs $744,000, has a six-year
life, and has no salvage value. Assume that depreciation is
straight-line to zero over the life of the project. Sales are
projected at 45,000 units per year. Price per unit is $60, variable
cost per unit is $20, and fixed costs are $740,000 per year. The
tax rate is 35 percent, and we require a return of 18 percent on
this project. Suppose the projections given for price, quantity,...

What is the annual operating cash flow for a 10 year project
that has annual sales of $650,000, its variable cost are 70% of
sales and has annual fixed cost of $130,000. The project requires
new equipment at a cost of $50,000 and installation costs of $3,000
and a plant that costs $70,000. Depreciation is under the straight
line method and the equipment has an estimated life of 10 years and
the plant an estimated life of 30 years. The...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 8 minutes ago

asked 14 minutes ago

asked 44 minutes ago

asked 48 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 2 hours ago

asked 3 hours ago

asked 3 hours ago

asked 3 hours ago

asked 3 hours ago

asked 4 hours ago