Question1

For a proposed project, a machine has an estimated installed cost, and basis, of $50,500 and would be depreciated straight-line to $2,500 over 6 years. The machine is expected to produce $20,500 in revenue the first year of which 40% is expected to be Account Receivables. The estimated expenses for the first year are as follows: Labor @ $7,500; utilities @ $5,700; production overhead @ $800; and interest @ $2,000. The company tax rate is 30%' What is the estimated Operating Cash Flow for the first year? $2,950.00 $4,350.00 $6,810.00 $12,550.00

The following information is used in Question above.

A Proposed Project would require a new machine with an estimated purchase price of $199,999. Shipping and handling are estimated to be $2,975. The machine would need an estimated $7,500 in inventory of which 35% would be on credit. The machine would be depreciated straight-line to $1,999 over 8 years. It is estimated the machine could be sold after 9 years for $500.

[a] What is the estimated Initial Investment?

[a] $204,874

[a] $205,044

[a] $207,294

[a] $207,669

The following information is used in Questions 1 and 2 above.

A Proposed Project would require a new machine with an estimated purchase price of $199,999. Shipping and handling are estimated to be $2,975. The machine would need an estimated $7,500 in inventory of which 35% would be on credit. The machine would be depreciated straight-line to $1,999 over 8 years. It is estimated the machine could be sold after 9 years for $500. The tax rate is 35%.

[b] What is the estimated Terminal Cash Flow?

[c] Which of the four tax situations applies to the sale of the machine?

		[b] $499; [c] Capital Gain
		[b] $599.60; [c] Depreciation Recapture
		[b] $449.70; [c] Breakeven
		[b] $524.65; [c] Capital Loss