4. A project is expected to increase a firm’s sales revenue by $12,000 annually,
ID: 2719240 • Letter: 4
Question
4. A project is expected to increase a firm’s sales revenue by $12,000 annually, decrease it cash expenses by $18,000 annually, and increase its depreciation by $10,000 annually. Given this information, what is the project’s expected annual net cash flow? Use a 40% effective tax rate.
$400
$12,000
$22,000
$18,000
5. The Gizaw Corporation has a bond outstanding that matures in the year 2018. But the corporation can pay the bond back early at the corporation’s option. What kind of feature is this option?
put feature
equity conversion feature
call feature
adjustable coupon rate feature
6. The final reconciliation of value should
be an average of all the approaches used.
ignore the approaches not used.
be based on the approach that is considered the most reliable.
none of the above.
7. If the appraiser finds deferred maintenance at the property, she should
add it to the value of the property.
subtract it from the value conclusion.
increase maintenance expense in the income statement.
use a higher discount rate.
8. When you have a fee simple interest in a property, which of the following do you NOT own?
the minerals under the ground
the air space above the ground
the ground and everything permanently attached to it
none of the above
9. The many factors influencing business risk can be placed in one of two categories. What are these two categories?
factors affecting sales revenue and those affecting assets
factors affecting assets and those effecting costs
factors affecting operating costs and those affecting financial costs
factors affecting sales revenue and those affecting costs
10. A capital budgeting project is expected to have the following cash flows:
Year Cash Flows
0 -$1,000,000
1 $400,000
2 $400,000
3 $200,000
4 $400,000
What is the project’s internal rate of return?
16.00%
8.99%
21.86%
15.54%
11. A capital budgeting project is expected to have the following cash flows:
Year Cash Flows
0 -$850,000
1 $300,000
2 $400,000
3 $500,000
What is the project’s net present value at an 18% required rate of return?
-$4,173.50
$10,800.96
-$18,725.33
$350,000.00
12. Luther’s Famous Barbeque has estimated the following cost of debt (before-tax) and cost of equity.
Proportion of Debt Before-tax Cost of Debt Cost of Equity
30% 7.0% 11.1%
40% 7.3% 11.9%
50% 8.4% 13.7%
What is the cost of capital at Luther’s optimal capital structure given the above information and a 40% effective tax rate?
8.71%
8.89%
9.03%
9.37%
Explanation / Answer
5)
Compute the expected annual cash flow of the project.
Note:
Please post one question at a time.
Particulars Amount($) Increase in sales revenue 12000 Decrease in cash expenses 18000 Less: Depreciation 10000 Cash Flow before tax 20000 Tax @ 40% 8000 Cash flow after tax 12000 Add: Depreciation expense 10,000 Net cash flow 22,000Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.