Determine the firms cash flow in year two

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Reference no: EM131057005

1. A sports game company with current sales of $400,000 does not expect any growth in sales for the next two years. The company, however, anticipates that expenses, currently at $200,000, will increase to $210,000 next year and to $220,500 the year after. Assuming a tax rate of 34%, determine the firm’s cash flow in year two. Assume annual depreciation is $20,000.

A. $112,360

B. $125,270

C. $145,890

D. $178,330

2. Which of the following comes closest to profitability index (PI) of a project that requires an initial investment of $800 and produces a single cash flow of $1,200 at the end of year 4 if the required rate of return is 5%?

A. 0.92

B. 1.23

C. 1.66

D. 2.05

Reference no: EM131057005

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