1. Maria Bakery is considering a 3-year project with an initial cost of $93,000. The project will not directly produce any sales but will reduce operating costs by $31,000 a year. The equipment is classified as MACRS 7-year property. The MACRS table values are .1429, .2449, .1749, .1249, .0893, .0892, .0893, and .0446 for Years 1 to 8, respectively. At the end of the project, the equipment will be sold for an estimated $43,270. The tax rate is 34 percent and the required return is 10 percent. An extra $12,000 of inventory will be required for the life of the project. What is the total cash flow for Year 3?
$72,360.75
$80,375.96
$91,599.44
$96,848.84
$102,219.50
2. A project will produce an operating cash flow of $403,000 a year for three years. The initial cash outlay for equipment will be $870,000. The net aftertax salvage value of $50,000 will be received at the end of the project. The project requires $72,000 of net working capital up front that will be fully recovered. What is the net present value of the project if the required rate of return is 15 percent?
$44,666.28
$53,216.81
$58,356.70
$55,450.16
$49,730.25