37) Colantro Corporation has provided the following information concerning a capital budgeting
project:
Tax rate
30
%
Expected life of the project
4
Investment required in equipment
$
240,000
Salvage value of equipment
$
0
Annual sales
$
490,000
Annual cash operating expenses
$
390,000
The company uses straight-line depreciation on all equipment.
The income tax expense in year 2 is:
A) $30,000
B) $3,000
C) $9,000
D) $12,000
Calculate the annual tax expense:
Sales
$
490,000
Cash operating expenses
$
(390,000
)
Depreciation expense
$
)
Incremental net income
$
Tax rate
%
Income tax expense
$
38) Chene Corporation has provided the following information concerning a capital budgeting
project:
Investment required in equipment
$
200,000
Annual sales
$
470,000
Annual cash operating expenses
$
340,000
The equipment will have a 4 year expected life and zero salvage value. The company’s income tax
rate is 30%, and the after-tax discount rate is 10%. The company uses straight-line depreciation on
all equipment; the annual depreciation expense will be $50,000. Assume cash flows occur at the
end of the year except for the initial investments. The company takes income taxes into account in
its capital budgeting.
See separate Exhibit 13B-1 to determine the appropriate discount factor(s) using table.
The net present value of the project is closest to:
A) $335,914
B) $224,000
C) $169,516
D) $135,914
Stockinger Corporation has provided the following information concerning a capital budgeting
project:
Investment required in equipment
$
280,000
Expected life of the project
4
Salvage value of equipment
$
0
Annual sales
$
580,000
Annual cash operating expenses
$
420,000
Working capital requirement
$
30,000
One-time renovation expense in year 3
$
80,000
The company’s income tax rate is 30% and its after-tax discount rate is 11%. The working capital
would be required immediately and would be released for use elsewhere at the end of the project.
The company uses straight-line depreciation on all equipment. Assume cash flows occur at the end
of the year except for the initial investments. The company takes income taxes into account in its
capital budgeting.
39) The total cash flow net of income taxes in year 2 is:
A) $133,000
B) $160,000
C) $90,000
D) $77,000
40) The total cash flow net of income taxes in year 3 is:
A) $77,000
B) $80,000
C) $48,000
D) $128,000
41) The net present value of the entire project is closest to:
A) $196,000
B) $61,763
C) $81,533
D) $122,469
Podratz Corporation has provided the following information concerning a capital budgeting
project:
After-tax discount rate
8
Tax rate
30
Expected life of the project
4
Investment required in equipment
$
200,000
Salvage value of equipment
$
0
Annual sales
$
580,000
Annual cash operating expenses
$
420,000
One-time renovation expense in year 3
$
60,000
The company uses straight-line depreciation on all equipment. Assume cash flows occur at the end
of the year except for the initial investments. The company takes income taxes into account in its
capital budgeting.
42) The total cash flow net of income taxes in year 2 is:
A) $160,000
B) $110,000
C) $127,000
D) $77,000
43) The total cash flow net of income taxes in year 3 is:
A) $61,500
B) $127,000
C) $85,000
D) $100,000
44) The net present value of the entire project is closest to:
See separate Exhibit 13B-1 to determine the appropriate discount factor(s) using table.
A) $187,276
B) $220,624
C) $308,000
D) $266,000
Mesko Corporation has provided the following information concerning a capital budgeting
project:
Investment required in equipment
$
80,000
Expected life of the project
4
Salvage value of equipment
$
0
Annual sales
$
270,000
Annual cash operating expenses
$
190,000
One-time renovation expense in year 3
$
40,000
The company’s income tax rate is 35% and its after-tax discount rate is 15%. The company uses
straight-line depreciation on all equipment. Assume cash flows occur at the end of the year except
for the initial investments. The company takes income taxes into account in its capital budgeting.
45) The income tax expense in year 2 is:
A) $12,000
B) $18,000
C) $6,000
D) $24,000
Calculate the annual tax expense:
Sales
$
Cash operating expenses
$
)
Depreciation expense
$
)
Incremental net income
$
Tax rate
%
Income tax expense
$
)
46) The income tax expense in year 3 is:
A) $6,000
B) $18,000
C) $24,000
D) $12,000
47) The total cash flow net of income taxes in year 2 is:
A) $42,000
B) $56,000
C) $62,000
D) $80,000
48) The total cash flow net of income taxes in year 3 is:
A) $34,000
B) $62,000
C) $14,000
D) $40,000
49) The net present value of the entire project is closest to:
See separate Exhibit 13B-1 to determine the appropriate discount factor(s) using table.
A) $78,648
B) $168,000
C) $97,072
D) $140,000
Manjarrez Corporation has provided the following information concerning a capital budgeting
project:
Investment required in equipment
$
240,000
Expected life of the project
4
Salvage value of equipment
$
0
Annual sales
$
560,000
Annual cash operating expenses
$
430,000
The company’s income tax rate is 30% and its after-tax discount rate is 6%. The company uses
straight-line depreciation on all equipment.Assume cash flows occur at the end of the year except
for the initial investments. The company takes income taxes into account in its capital budgeting.
50) The income tax expense in year 2 is:
A) $18,000
B) $168,000
C) $21,000
D) $129,000
Calculate the annual tax expense:
Sales
$
Cash operating expenses
$
)
Depreciation expense
$
)
Incremental net income
$
Tax rate
%
Income tax expense
$
51) The total cash flow net of income taxes in year 2 is:
A) $109,000
B) $130,000
C) $70,000
D) $21,000
52) The net present value of the entire project is closest to:
See separate Exhibit 13B-1 to determine the appropriate discount factor(s) using table.
A) $377,685
B) $137,685
C) $210,450
D) $196,000
60
Waltermire Corporation has provided the following information concerning a capital budgeting
project:
After-tax discount rate
12
Tax rate
30
Expected life of the project
4
Investment required in equipment
$
160,000
Salvage value of equipment
$
0
Working capital requirement
$
30,000
Annual sales
$
460,000
Annual cash operating expenses
$
340,000
The working capital would be required immediately and would be released for use elsewhere at the
end of the project. The company uses straight-line depreciation on all equipment. Assume cash
flows occur at the end of the year except for the initial investments. The company takes income
taxes into account in its capital budgeting.
53) The income tax expense in year 2 is:
A) $24,000
B) $12,000
C) $102,000
D) $138,000
Calculate the annual tax expense:
Sales
$
Cash operating expenses
$
Depreciation expense
$
Incremental net income
$
Tax rate
Income tax expense
$
54) The total cash flow net of income taxes in year 2 is: