Analyzing a proposed project

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Reference no: EM1338488

Q1) All of the following are related to a proposed project. Which of these should be included in the cash flow at time zero?

1. purchase of $1400. of parts inventory needed to support project
2. loan of $125,000 used to finance the project
3. depreciation tax shield of $1,100
4. $6500 of equipment needed to commence the project.

a. 1 and 2 only
b. 1 and 4 only
c. 2 and 4 only
d. 1, 2, and 4 only
e. 1, 2, 3 and 4

Q2) Thomas Mfg. is analyzing a proposed project. The company expects to sell 8000 units. plus or minus 2%. The expected variable cost per unit is $11. and the expected fixed costs are $287,000. The fixed and variable cost estimates are considered accurate within a plus or minus 5 % range. The depreciation expense is $68,000. The tax rate is 32%. The sales price is estimated at $64. a unit give or take 3%. What is the operating cash flow under the best case scenario?

a. $144,150
b. $148,475
c. $107,146
d. $168,630
e. $174,220

Reference no: EM1338488

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