94) The total cash flow net of income taxes in year 2 is:
A) $61,000
B) $70,000
C) $110,000
D) $89,000
95) The total cash flow net of income taxes in year 3 is:
A) $70,000
B) $49,000
C) $89,000
D) $61,000
96) The net present value of the entire project is closest to:
See separate Exhibit 13B-1, to determine the appropriate discount factor(s) using the tables
provided.
A) $85,282
B) $139,420
C) $245,282
D) $168,000
Paletta 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
$
660,000
Annual cash operating expenses
$
470,000
One-time renovation expense in year 3
$
80,000
The company’s income tax rate is 30% and its after-tax discount rate is 7%. 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.
97) The total cash flow net of income taxes in year 2 is:
A) $154,000
B) $120,000
C) $98,000
D) $190,000
98) The total cash flow net of income taxes in year 3 is:
A) $98,000
B) $110,000
C) $74,000
D) $154,000
99) The net present value of the entire project is closest to:
See separate Exhibit 13B-1, to determine the appropriate discount factor(s) using the tables
provided.
A) $298,250
B) $475,902
C) $195,902
D) $280,000
Rollans Corporation has provided the following information concerning a capital budgeting
project:
After-tax discount rate
14
%
Tax rate
30
%
Expected life of the project
4
Investment required in equipment
$
200,000
Salvage value of equipment
$
0
Annual sales
$
430,000
Annual cash operating expenses
$
300,000
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.
100) The income tax expense in year 2 is:
A) $105,000
B) $39,000
C) $180,000
D) $24,000
Calculate the annual tax expense:
Sales
$
Cash operating expenses
$
)
Depreciation expense
$
)
Incremental net income
$
Tax rate
%
Income tax expense
$
(24,000)
101) The total cash flow net of income taxes in year 2 is:
A) $80,000
B) $24,000
C) $106,000
D) $130,000
102) The net present value of the entire project is closest to:
See separate Exhibit 13B-1, to determine the appropriate discount factor(s) using the tables
provided.
A) $308,778
B) $224,000
C) $108,778
D) $118,230
Planas 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
$
210,000
Annual cash operating expenses
$
150,000
One-time renovation expense in year 3
$
30,000
The company’s income tax rate is 30% and its after-tax discount rate is 14%. 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.
103) The income tax expense in year 2 is:
A) $18,000
B) $9,000
C) $12,000
D) $3,000
Calculate the annual tax expense:
Sales
$
Cash operating expenses
$
)
Depreciation expense
$
)
Incremental net income
$
Tax rate
%
Income tax expense
$
(12,000)
104) The income tax expense in year 3 is:
A) $12,000
B) $18,000
C) $3,000
D) $9,000
105) The net present value of the entire project is closest to:
See separate Exhibit 13B-1, to determine the appropriate discount factor(s) using the tables
provided.
A) $59,824
B) $91,000
C) $45,649
D) $130,000
Bedolla Corporation is considering a capital budgeting project that would require investing
$160,000 in equipment with an expected life of 4 years and zero salvage value. Annual
incremental sales would be $430,000 and annual incremental cash operating expenses would be
$310,000. The company’s income tax rate is 30% and its after-tax discount rate is 8%. The
company uses straight-line depreciation. 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.
106) The income tax expense in year 2 is:
A) $12,000
B) $24,000
C) $93,000
D) $129,000
107) The total cash flow net of income taxes in year 2 is:
A) $80,000
B) $96,000
C) $24,000
D) $120,000
108) The net present value of the entire project is closest to:
See separate Exhibit 13B-1, to determine the appropriate discount factor(s) using the tables
provided.
A) $317,952
B) $157,952
C) $237,440
D) $224,000
Annala Corporation is considering a capital budgeting project that would require investing
$80,000 in equipment with an expected life of 4 years and zero salvage value. Annual incremental
sales would be $250,000 and annual incremental cash operating expenses would be $180,000. The
project would also require an immediate investment in working capital of $20,000 which would be
released for use elsewhere at the end of the project. The company’s income tax rate is 30% and its
after-tax discount rate is 13%. The company uses straight-line depreciation. 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.
109) The income tax expense in year 2 is:
A) $75,000
B) $54,000
C) $6,000
D) $15,000
110) The total cash flow net of income taxes in year 2 is:
A) $15,000
B) $70,000
C) $55,000
D) $50,000
111) The net present value of the entire project is closest to:
See separate Exhibit 13B-1, to determine the appropriate discount factor(s) using the tables
provided.
A) $140,000
B) $120,440
C) $75,830
D) $63,570
Houze Corporation has provided the following information concerning a capital budgeting project:
After-tax discount rate
7
%
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
$
360,000
Annual cash operating expenses
$
290,000
One-time renovation expense in year 3
$
20,000
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.
112) The total cash flow net of income taxes in year 2 is:
A) $30,000
B) $49,000
C) $61,000
D) $70,000