Expansion project-requires initial fixed asset investments

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Reference no: EM132008921

1. Summer Tyme, Inc., is considering a new 5-year expansion project that requires an initial fixed asset investment of $1.836 million. The fixed asset will be depreciated straight-line to zero over its 5-year tax life, after which time it will be worthless. The project is estimated to generate $1,632,000 in annual sales, with costs of $652,800.

Required:

If the tax rate is 35 percent, what is the OCF for this project?

$803,250

$726,750

$765,000

$397,800

$979,200

2. Lab R Doors' year-end price on its common stock is $55. The firm has a profit margin of 11.5%, total assets of $30 million, a total asset turnover ratio of 2.00, no preferred stock, and there are 4.0 million shares of common stock outstanding. What is the PE ratio for Lab R Doors? (Do not round intermediate steps.)

a. 0.546

b. 0.273

c. 14.493

d. 31.884

Reference no: EM132008921

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