The project is evaluated over a 5 year investment horizon

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1. A firm is looking at replacing a machine. The new machine will cost $774425 and in 5 years' time the machine could be sold for $162713. The allowable depreciation rate is 10.6% on a straight line basis. The company tax rate is 30%. What is the terminal cash flow assuming the project is evaluated over a 5 year investment horizon? (The allowed rounding error for this question is within 1%. Please round your answer to the nearest dollar but exclude $ and, when typing your answer.)
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2. A firm is considering relaxing its credit standards which will result in annual sales increasing from $1.50 million to $2.12 million. Costs of goods sold represent 53 percent of sales and the average collection period is expected to increase from 33 to 51 days. If the firm requires a return of 9.9 percent, what the cost of investing in the extra accounts receivables from the planned relaxation of credit standards? (Please round your answer to the nearest dollar but exclude the $ sign when typing your answer.) WARNING: This is NOT an easy question - I suggest you print out the quiz once you have completed it for future reference.
Solution:
Detail calculation? 

Reference no: EM13749260

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