1. XYZ, Inc. is considering a new project requiring a $180,000 initial investment in equipment having a useful life of 3 years with zero expected salvage value. The investment will produce $130,000 in annual revenues and $90,000 in annual costs. Assume a tax rate of 30% and straight-line depreciation. What is the operating cash flow per year?
$46,000
$66,000
$70,000
$58,000
$88,000
2. Your company plans to spend $2,150,000 cash to build a plant that will produce benefits with a total present value of $4,050,000. Your company already owns the land on which it will build the plant. That land was purchased with cash several years ago for $700,000, which is the current book value of the land. The land could be sold for $1,775,000 after-tax today. What is the net present value of the proposed plant?
($575,000)
($125,000)
$0
$125,000
$1,900,000