A new project will generate sales of $74 million, costs of $42 million, and depreciation expense of $10 million in the coming year. The firm%u2019s tax rate is 35%. Calculate cash flow for the year by using all three methods: (a) direct method (dollar in – dollar out); (b) indirect method (net income adjusted for non-cash items); and (c) the depreciation tax shield approach. You should get the same answer. $7.7 Millions
Question 2 2 pts
The only capital investment required for a small project is investment in inventory. Profits this year were $10,000, and inventory increased from $4,000 to $5,000. What was the cash flow from the project? $11,000
Question 3 2 pts
What is the cash flow from operations for the following firm: $750,000 sales, $20,000 cash dividends, $500,000 COGS, $40,000 administrative expense, $30,000 depreciation expense, $55,000 interest expense, no changes in working capital, and a tax rate of 35%? $180,000
Question 4 2 pts
What is the amount of the annual depreciation tax shield for a firm with $200,000 in net income, $75,000 in depreciation expense and a 35% marginal tax rate? $48,750
Question 5 1 pts
Cowabunga Aquatics is considering expanding their operations by building a new water park. It already spent $1 million to excavate the land some years ago. Cowabunga also estimates that cash flows from its other water parks will decrease by $2 million if the new water park is built. Which of the costs should Cowabunga consider when determining the value of this project? The $1 million land excavation cost
The $2 million decrease to its other water parks
None of these costs
Question 6 2 pts
In what manner does depreciation affect cash flows of an investment projects? It increases cash flows by the amount of the depreciation expense.
It reduces taxes paid by the amount of depreciation tax shield.
It reduces cash flows by the amount of the depreciation expense.
It increases taxable income by the amount of the depreciation expense.
Question 7 1 pts
Methods of accelerated depreciation: increase the depreciation tax shield.
decrease the depreciation tax shield.
allow more depreciation over the asset’s life.
allow assets to be depreciated more rapidly
We value our customers and so we ensure that what we do is 100% original..
With us you are guaranteed of quality work done by our qualified experts.Your information and everything that you do with us is kept completely confidential.
You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.Read more
The Product ordered is guaranteed to be original. Orders are checked by the most advanced anti-plagiarism software in the market to assure that the Product is 100% original. The Company has a zero tolerance policy for plagiarism.Read more
The Free Revision policy is a courtesy service that the Company provides to help ensure Customer’s total satisfaction with the completed Order. To receive free revision the Company requires that the Customer provide the request within fourteen (14) days from the first completion date and within a period of thirty (30) days for dissertations.Read more
The Company is committed to protect the privacy of the Customer and it will never resell or share any of Customer’s personal information, including credit card data, with any third party. All the online transactions are processed through the secure and reliable online payment systems.Read more
By placing an order with us, you agree to the service we provide. We will endear to do all that it takes to deliver a comprehensive paper as per your requirements. We also count on your cooperation to ensure that we deliver on this mandate.Read more