Question1. Masters Musical Instruments is measuring a project that is anticipated to give annual cash flows of $12,600 for 10 years and needs an investment today of $65,300. At what rate would Barker be indifferent between accepting the project and rejecting it?
A. 9.94 percent
B. 11.68 percent
C. 14.17 percent
D. 16.75 percent
E. 19.13 percent
Question2. Cherry wood Contracting is evaluating a project that will raise yearly sales by $258,000 and annual costs by $109,000. The project will initially need acquisition of a $120,000 machine that will be depreciated straight-line to a zero book value over the 4-year life of the project. Cherry wood’s combined federal, state and local tax rate is 45 percent. What is the operating cash flow for this project?
A. $38,720
B. $65,450
C. $95,450
D. $107,920
E. $149,000
Question3. Ultimate Home Appliance Emporium is expanding its product offerings in order to satisfy a wider range of customer styles and tastes. The expansion project consists of raising the floor inventory by $610,000 and raising its debt to suppliers by 70 percent of that amount. Ultimate plans to expand the size of its showroom and expects to spend $350,000 for the architect and building contractor to do the renovation. As part of expansion plan, the company will be providing credit to its customers and thus expects accounts receivable to increase by $63,000. For the project analysis, what amount must be employed as the initial cash flow for net working capital?
A. -$70,000
B -$156,000
C. -$219,000
D. -$246,000
E. -$391,000