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[>Marketing homework help](https://www.sweetstudy.com/fields/business-finance-marketing) Week 3 Multiple choice questions. please answer multiple choice questions correctly. Thanks **files (1)** – ## Week3Homework.pdf **## Week3Homework.pdf** Exam Name________________________…
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[>Marketing homework help](https://www.sweetstudy.com/fields/business-finance-marketing)
Week 3 Multiple choice questions. please answer multiple choice questions correctly. Thanks
**files (1)**
– ## Week3Homework.pdf
**## Week3Homework.pdf**
Exam
Name___________________________________
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
Use the following information to answer the question(s) below.
You are considering investing in a start-up project at a cost of $100,000. You expect the project to return $500,000 to you in
seven years. Given the risk of this project, your cost of capital is 20%.
1) The NPV for this project is closest to: 1)
A) $39,500. B) $139,500. C) $29,200. D) $129,200.
2) The decision you should take regarding this project is: 2)
A) accept the project since the IRR > 20%.
B) reject the project since the NPV is negative.
C) reject the project since the NPV is positive.
D) accept the project since the IRR < 20%.
3) You are considering adding a microbrewery on to one of your firm's existing restaurants. This will
entail an increase in inventory of $8000, an increase in accounts payable of $2500, and an increase in
property, plant, and equipment of $40,000. All other accounts will remain unchanged. The change
in net working capital resulting from the addition of the microbrewery is:
3)
A) $6500. B) $10,500. C) $45,500. D) $5500.
4) You are considering adding a microbrewery on to one of your firm's existing restaurants. This will
entail an investment of $40,000 in new equipment. This equipment will be depreciated straight line
over five years. If your firm's marginal corporate tax rate is 21%, then what is the value of the
microbrewery's depreciation tax shield in the first year of operation?
4)
A) $14,000 B) $26,000 C) $5200 D) $1680
Use the information for the question(s) below.
Shepard Industries is evaluating a proposal to expand its current distribution facilities. Management has projected the project
will produce the following cash flows for the first two years (in $millions).
Year 1 2
Revenues 1200 1400
Operating Expense 450 525
Depreciation 240 280
Increase in working capital 60 70
Capital expenditures 300 350
Marginal corporate tax rate 21% 21%
5) The incremental EBIT for the Shepard Industries project in year one is closest to: 5)
A) $750 million. B) $510 million. C) $360 million. D) $595 million.
6) The free cash flow from the Shepard Industries project in year one is closest to: 6)
A) $283 million. B) $390 million. C) $300 million. D) -$5 million.
1
**## Week3Homework.pdf**
Exam
Name___________________________________
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
Use the following information to answer the question(s) below.
You are considering investing in a start-up project at a cost of $100,000. You expect the project to return $500,000 to you in
seven years. Given the risk of this project, your cost of capital is 20%.
1) The NPV for this project is closest to: 1)
A) $39,500. B) $139,500. C) $29,200. D) $129,200.
2) The decision you should take regarding this project is: 2)
A) accept the project since the IRR > 20%.
B) reject the project since the NPV is negative.
C) reject the project since the NPV is positive.
D) accept the project since the IRR < 20%.
3) You are considering adding a microbrewery on to one of your firm's existing restaurants. This will
entail an increase in inventory of $8000, an increase in accounts payable of $2500, and an increase in
property, plant, and equipment of $40,000. All other accounts will remain unchanged. The change
in net working capital resulting from the addition of the microbrewery is:
3)
A) $6500. B) $10,500. C) $45,500. D) $5500.
4) You are considering adding a microbrewery on to one of your firm's existing restaurants. This will
entail an investment of $40,000 in new equipment. This equipment will be depreciated straight line
over five years. If your firm's marginal corporate tax rate is 21%, then what is the value of the
microbrewery's depreciation tax shield in the first year of operation?
4)
A) $14,000 B) $26,000 C) $5200 D) $1680
Use the information for the question(s) below.
Shepard Industries is evaluating a proposal to expand its current distribution facilities. Management has projected the project
will produce the following cash flows for the first two years (in $millions).
Year 1 2
Revenues 1200 1400
Operating Expense 450 525
Depreciation 240 280
Increase in working capital 60 70
Capital expenditures 300 350
Marginal corporate tax rate 21% 21%
5) The incremental EBIT for the Shepard Industries project in year one is closest to: 5)
A) $750 million. B) $510 million. C) $360 million. D) $595 million.
6) The free cash flow from the Shepard Industries project in year one is closest to: 6)
A) $283 million. B) $390 million. C) $300 million. D) -$5 million.
1
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