11 Assuming both are allowed by the tax laws, is it better to depreciate a capit
ID: 1095318 • Letter: 1
Question
11
Assuming both are allowed by the tax laws, is it better to depreciate a capital investment over 2 years or 3 ? Assume straight line depreciation for both so in the first case the depreciation is 50% and 50% and in the second it is 33%, 33% and 33%.
Construct the managerial balance sheet from the following information
Cash = $20 million
Accounts payable = $4 million
Short and long term liability = $81 million
Inventory = $15 million
Intangible assets = $0 million
Accounts receiveable = $3 million
Tangible assets = $80 million
Make sure you identify capital employed and working capital required.
12 What is the owners equity that you arrive at ?
13 What is the working capital requirement ?
14 When correcting an Income Statement to get to produce a cash flow statement you often need to add back depreciation ?
True False
15 Revenues at your company decline by 25%, which of the following will likely occur with all else equal.
A Cash flow will decline
BNet Income will improve
C Depreciation will increase
D None of the above
16 Your business uses cash it already has to buy a competitors chemical plant for $60 million. How much does the right hand side of the balance sheet change by ?
A Up by $60 millionB It doesn
Explanation / Answer
15)
A Cash flow will decline
16)
C Down by $60 million
17)
A $10 million
18)
amount left to depricate = 100000 * (1- 3/4) = 25000
19)
amount raised = 35- 35 = 10 million
20)
NPV goes down
21)
depriciation per year = 200
let x be the price per ball
net cash flow per year = (100x - 250 -10x -200) * (1-0.4) + 200
so
0 = -2000 + [(100x - 250 -10x -200) * (1-0.4) + 200] * [1-(1+0.1)^-10]/0.1
x = 7.32 per ball bearing
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