1. 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. If WACC is 12.0%, what is the terminal value that should be added to Year 6 cash flows?
$30.0 million
$28.6 million
$14.0 million
2. A capital budgeting project analysis at your firm currently shows Year 2 operating income of $1.5 million and depreciation of $500,000. If the relevant tax rate is 40.0%, what is Year 2 net incremental cash flow?
$1.4 million
$2.0 million
$900,000
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?
$2.1 million
$2.5 million
$30.0 million
4. 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?
$2.1 million
$2.5 million
$30.0 million