Reference no: EM132038182

Questions -

Q1. (Ignore income taxes in this problem.) Frick Road Paving Corporation is considering an investment in a curb-forming machine. The machine will cost $180,000, will last 10 years, and will have a $30,000 salvage value at the end of 10 years. The machine is expected to generate net cash inflows of $40,000 per year in each of the 10 years. Frick's discount rate is 10%. Which is the net present value of the proposed investment closest to?

A. $65,800

B. $250,000

C. $245,800

D. $77,380

Q2. Bevans Corporation is considering a capital budgeting project that would require an initial investment of $190,000. The investment would generate annual cash inflows of $58,000 for the life of the project, which is 4 years. The company's discount rate is 7%. What is the net present value of the project closest to?

A. $6,446

B. $42,000

C. $196,446

D. $190,000

Q3. Onorato Corporation has provided the following information concerning a capital budgeting project:

Tax rate...................................... 30%

Expected life of the project................4

Investment required in equipment.....$280,000

Salvage value of equipment...............$0

Annual sales.....................................$600,000

Annual cash operating expenses........$440,000

The company uses straight-line depreciation on all equipment. How much is the total cash flow net of income taxes in year 2?

A. $98,000

B. $160,000

C. $133,000

D. $90,000