Reference no: EM131903852

1. Marshall's & Co. purchased a corner lot in Eglon City five years ago at a cost of $670,000. The lot was recently appraised at $697,000. At the time of the purchase, the company spent $33,000 to grade the lot and another $4,100 to build a small building on the lot to house a parking lot attendant who has overseen the use of the lot for daily commuter parking. The company now wants to build a new retail store on the site. The building cost is estimated at $1,200,000. What amount should be used as the initial cash flow for this building project?

$1,877,400

$1,900,300

$1,897,000

$1,870,000

$1,904,400

2. Use the table below to answer this question.

MACRS 5-year property
Year	Rate
1	20.00%
2	32.00%
3	19.20%
4	11.52%
5	11.52%
6	5.76%

Sun Lee's Furniture just purchased some fixed assets classified as 5-year property for MACRS. The assets cost $39,000. What is the amount of the depreciation expense for the third year?

$7,488

$4,493

$3,744

$12,480

$6,240

3. Use the table below to answer this question.

MACRS 5-year property
Year	Rate
1	20.00%
2	32.00%
3	19.20%
4	11.52%
5	11.52%
6	5.76%

Ronnie's Custom Cars purchased some fixed assets two years ago for $115,000. The assets are classified as 5-year property for MACRS. Ronnie is considering selling these assets now so he can buy some newer fixed assets which utilize the latest in technology. Ronnie has been offered $59,500 for his old assets. What is the net cash flow from the salvage value if the tax rate is 34 percent?

$50,530.80

$59,500.00

$58,038.00

$46,026.48

$55,200.00

4. A project is expected to create operating cash flows of $25,000 a year for three years. The initial cost of the fixed assets is $52,000. These assets will be worthless at the end of the project. An additional $3,500 of net working capital will be required throughout the life of the project. What is the project's net present value if the required rate of return is 12 percent?
$10,537.01

$4,545.78

$3,537.01

$1,958.33

$7,037.01