1. Operating income for Fake Company Gamma (FCG) in 2017 is projected to be $7.8 million. If the company's EBIT is the same as operating income, and if its tax rate is estimated at 28%, what is NOPAT?
a) about $5.6 million
b) about $2.2 million
c) $7.8 million
2. A capital budgeting project analysis at your firm currently shows Year 4 operating income of $400,000 million and depreciation of $100,000. If the relevant tax rate is 40.0%, what is Year 4 net incremental cash flow?
a) $500,000
b) $340,000
c) $240,000
3. After the last year of your project’s time frame, which is Year 6, you believe cash flows will grow at about 5.0% per year forever. An initial estimate of Year 6 net incremental cash flow is $2 million. What is the cash flow expected to be in Year 7?
a) $30.0 million
b) $2.5 million
c) $2.1 million