Reference no: EM133042700

Question -

Q1) A five-year project requires installing a machine with an initial fixed asset investment of $613,600. The project is expected to sell 1000 containers annually. The annual fixed cost is $156000 and variable cost for each container is $50. At the beginning of the project, inventory will decrease by $20,000, accounts receivables will increase by $23,000, and accounts payable will increase by $16,500. At the end of the project, net working capital will return to the level it was prior to undertaking the new project. The machine is fully depreciated over the life of the project. The machine equipment will be salvaged at the end of the project creating a cash flow of $58,000. The required return is 12 percent and tax rate is 25%. What is the project's equivalent annual cost (EAC) in dollars?

Q2) Table Manufacturers Ltd is contemplating making and selling small and large tables. The small tables would be priced at $10 and the large tables would be $30. The variable cost per unit is $6 and $15, respectively. The sales department expects to sell 3,600 units of the small tables and 2,000 units of the large tables each year. Given the fixed costs of $2,120 a year, the annual depreciation expense of $1,350, and the annual tax rate of 34 percent, what would be the annual operating cash flow?