# (solution) 1.) ABC Company has a proposed project that will generate sales

1.) ABC Company has a proposed project that will generate sales of 464 units annually at a selling price of \$176 each. The fixed costs are \$5,753 and the variable costs per unit are \$94. The project requires \$29,415 of equipment that will be depreciated on a straight-line basis to a zero book value over the 4-year life of the project. That is, depreciation each year is \$29,415/4. That tax rate is 29 percent. What is the operating cash flow?

2.) ABC Corporation is considering an expansion project. The necessary equipment could be purchased for \$20,895 and shipping and installation costs are another \$723. The project will also require an initial \$4,374 investment in net working capital. The company’s tax rate is 40%. What is the project’s initial investment outlay?

3.) A project has an initial requirement of \$210,739 for new equipment and \$9,766 for net working capital. The installation costs to get the new equipment in working condition are 2,237. The fixed assets will be departed to a zero book value over the 4-year life of the project and have an estimated salvage value of \$141,243. All of the net working capital will be recouped at the end of the project. The annual operating cash flow is \$107,970 and the cost of the capital is 18%. What is the projects NPV if the tax rate is 35%?

4.) ABC has a proposed project which will generate sales of 135 units at a selling price of \$265 each. The fixed costs are \$14,209 and the variable costs per unit are \$67. The project requires \$194,948 of machinery which will be depreciated on a straight-line basis over the 5-year life of the project. That is, depreciation each year is \$194,948/5. The tax rate is 28%. What is the operating cash flow?

Sales
Less Expense
Variable Expense
Fixed Cost
Depreciation
PBT
TAX
PAT 