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##### finance homework mcq eco282

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Question;Project Analysis and Evaluation;1. You are;given the following data for year-1. Revenue = \$43, Total costs = \$30;Depreciation = \$3, Tax rate = 30%. Calculate the operating cash flow for the;project for year-1.;a. \$7 B. \$10;c. \$13;d. None of;the above;2. A project;has an initial investment of 100. You have come up with the following estimates;of the projects with cash flows.;If the cash flows are perpetuities and the cost of capital;is 10%. What does a sensitivity analysis of NPV (no taxes) show?;A. -50, 20, +100;b. -100;-50, +80;c. -50;+50, +70;d. None of;the above;3. You are;given the following data for year-1: Revenues = 100, Fixed costs = 30, Total;variable costs = 50, Depreciation = \$10, Tax rate = 30%. Calculate the after;tax cash flow for the project for year-1.;A. \$17;b. \$7;c. \$10;d. None of;the above;4. A project;has the following cash flows: C0= -100,000, C1= 50,000, C2= 150,000, C3=;100,000. If the discount rate changes from 12% to 15%, what is the change in;the NPV of the project (approximately)?;a. 12,750;increase;B. 12,750 decrease;c. 122,650;increase;d. 135,400;decrease;45;Junjie Liu ? Econ 282 Practice;Multiple Choice;5. You have;come up with the following estimates of project cash flows;The cash flows are perpetuities and the cost of capital is;8%. What does a sensitivity analysis of NPV (without taxes) show?;A. 25, +232.50, +440;b. 100;+500, +800;c. 90, -55;-20;d. One of;the above;6. A project;has an initial investment of \$150. You have come up with the following;estimates of revenues and costs. Calculate the NPV assuming that cash flow and;perpetuities. (No taxes.) (Cost of capital =10%);a. 50, -100;+400;b. 50, +300;+500;C. 100, +150, +350;d. One of;the above;7. A project;requires an initial investment in equipment of \$90,000 and then requires an;investment in working capital of \$10,000 at the beginning (t = 0). The project;is expected to produce sales revenues of \$120,000 for three years.;Manufacturing costs are estimated to be 60% of the revenues. The assets are;depreciated using straight-line depreciation. At the end of the project, the;firm can sell the equipment for \$10,000. The corporate tax rate is 30% and the;cost of capital is 15%. Cash flows from the project are;a. CF0;-90,000, CF1: 12,600, CF2: 12,600, CF3: 29,600;B. CF0: -100,000, CF1: 42,600, CF2: 42,600, CF3: 59,600;c. CF0;-100,000, CF1: 42,600, CF2: 42,600, CF3: 42,600;d. None of;the above;8. A project;requires an initial investment in equipment of \$90,000 and then requires an;investment in working capital of \$10,000 at the beginning (t = 0). The project;is expected to produce sales revenues of \$120,000 for three years.;Manufacturing costs are estimated to be 60% of the revenues. The assets are;depreciated using straight-line depreciation. At the end of the project, the;firm can sell the equipment for \$10,000. The corporate tax rate is 30% and the;cost of capital is 15%. Calculate the NPV of the project;a. 3840;B. 8443;c. -2735;d. None of;the above;46;Junjie Liu ? Econ 282 Practice;Multiple Choice;9. A project;requires an initial investment in equipment of \$90,000 and then requires an;investment in working capital of \$10,000 at the beginning (t = 0). The project;is expected to produce sales revenues of \$120,000 for three years.;Manufacturing costs are estimated to be 60% of the revenues. The assets are;depreciated using straight-line depreciation. At the end of the project, the;firm can sell the equipment for \$10,000. The corporate tax rate is 30% and the;cost of capital is 12%. Calculate the NPV of the project;A. 14,418;b. 8443;c. -2735;d. None of;the above;10. A project;requires an initial investment in equipment of \$90,000 and then requires an;investment in working capital of \$10,000 at the beginning (t = 0). The project;is expected to produce sales revenues of \$120,000 for three years.;Manufacturing costs are estimated to be 60% of the revenues. The assets are;depreciated using straight-line depreciation. At the end of the project, the;firm can sell the equipment for \$10,000. The corporate tax rate is 30% and the;cost of capital is 15%.What would the NPV of the project be if the revenues;were higher by 10% and the costs were 65% of the revenues?;a. \$8443;b. \$964;C. \$5566;d. None of;the above;11. A project;requires an initial investment in equipment of \$90,000 and then requires an;investment in working capital of \$10,000 at the beginning (t = 0). The project;is expected to produce sales revenues of \$120,000 for three years.;Manufacturing costs are estimated to be 60% of the revenues. The assets are;depreciated using straight-line depreciation. At the end of the project, the;firm can sell the equipment for \$10,000. The corporate tax rate is 30% and the;cost of capital is 15%.What would the NPV if the discount rate were higher by;10%?;A. \$5648;b. \$3840;c. -\$2735;d. None of;the above;12. The;following are drawbacks of sensitivity analysis except;a. It;provides ambiguous results;b. Underlying;variables are likely to be interrelated;C. It provides additional information about the project that;is useful;d. All of;the above statements are drawbacks of sensitivity analysis;13. Which of;the following statements most appropriately describes "Scenario;Analysis;a. It looks;at the project by changing one variable at a time;b. It;provides the break-even level of sales for the project;C. It looks at different but consistent combination of;variables;d. Each of the above statements describes "Scenario;Analysis" correctly;47;Junjie Liu ? Econ 282 Practice;Multiple Choice;14. Financial;Calculator Company proposes to invest \$12 million in a new calculator making;plant. Fixed costs are \$3 million a year. A financial calculator costs \$10 per;unit to manufacture and can be sold for \$30 per unit. If the plant lasts for 4;years and the cost of capital is 20%, what is the break-even level (i.e. NPV =;0) of annual rates? (Approximately) (Assume no taxes.);a. 150,000;units;b. 342,290;units;C. 381,777 units;d. None of;the above;15. Calculator;Company proposes to invest \$5 million in a new calculator making plant. Fixed;costs are \$2 million a year. A calculator costs \$5/unit to manufacture and can;be sold for \$20/unit. If the plant lasts for 3 years and the cost of capital;is12%, what is the approximate break-even level (i.e. NPV = 0) of annual sales?;(Assume no taxes.) (Approximately);a. \$133,333;units;B. \$272,117 units;c. \$227,533;units;d. None of;the above;16. Firms;often calculate a project's break-even sales using book earnings. Generally;break-even sales based on NPV is;A. Higher than the one calculated using book earnings;b. Lower;than the one calculated using book earnings;c. Equal to;the one calculated using book earnings;d. None of;the above;17. The;accounting break-even point occurs when;a. The total;revenue line cuts the fixed cost line;b. The;present value of inflows line cuts the present value of outflows line;C. The total revenue line cuts the total cost line;d. None of;the above;18. The NPV;break-even point occurs when;A. The present value of inflows line cuts the present value;of outflows line;b. The total;revenue line cuts the fixed cost line;c. The;total revenue line cuts the total cost line;d. None of;the above;48;Junjie Liu ? Econ 282 Practice;Multiple Choice;19. Financial;Calculator Company proposes to invest \$12 million in a new calculator making;plant. Fixed costs are \$3 million a year. A financial calculator costs \$10 per;unit to manufacture and can be sold for \$30 per unit. If the plant lasts for 4;years and the cost of capital is 20%, what is the accounting break-even level?;(Approximately) (Assume no taxes.);A. 300,000 units;b. 150,000;units;c. 381,777;units;d. None of;the above;20. Calculator;Company proposes to invest \$5 million in a new calculator making plant. Fixed;costs are \$2 million a year. A calculator costs \$5/unit to manufacture and can;be sold for \$20/unit. If the plant lasts for 3 years and the cost of capital;is12%, what is the approximate break-even level (accounting) of annual sales?;(Assume no taxes.) (Approximately);a. \$133,334;units;b. \$272,117;units;C. \$244,444 units;d. None of;the above;21. Taj Mahal;Tour Company proposes to invest \$3 million in a new tour package project. Fixed;costs are \$1 million per year. The tour package costs \$500 and can be sold at;\$1500 per package to tourists. This tour package is expected to be attractive;for the next five years. If the cost of capital is 20%, what is the NPV;break-even number of tourists per year? (Ignore taxes, give an approximate;answer);a. 1000;B. 2000;c. 15000;d. None of;the above;22. Hammer;Company proposes to invest \$6 million in a new type of hammer-making equipment.;The fixed costs are \$0.5 million per year. The equipment is expected to last;for five years. The manufacturing cost per hammer is \$1and the selling price;per hammer is \$6. Calculate the break-even (i.e. NPV = 0) volume per year.;(Ignore taxes.);A. 500,000 units;b. 600,000;units;c. 100,000;units;d. None of;the above;49

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