Colors and More is considering replacing the equipment it uses to produce crayons. The equipment would cost $1.03 million, have a 12-year life, and lower manufacturing costs by an estimated $280,000 per year. The equipment will be depreciated using straight-line depreciation over its expected life to a book value of zero. Ignore bonus depreciation. The required rate of return is 13 percent and the tax rate is 23 percent. What is the annual operating cash flow?

Western Wear is considering a project that requires an initial investment of $602,000. The firm maintains a debt-equity ratio of .55 and has a flotation cost of debt of 4.9 percent and a flotation cost of equity of 10.2 percent. The firm has sufficient internally generated equity to cover the equity portion of this project. What is the initial cost of the project including the flotation costs?

What is the expected return and standard deviation for the following stock? State of Economy Probability of State of Economy Rate of Return if State Occurs Boom .08 −.02 Normal .73 .098 Recession .19 .138

Alumak, Incorporated, uses high-tech equipment to produce specialized products. Each one of its machines costs $55,000 to purchase plus an additional $6,000 per year to operate. The machines have a four-year life after which they are worthless. What is the equivalent annual cost of one of these machines if the required return is 15 percent?

A two-year project has sales of $582,960, cash costs of $411,015, and depreciation expense of $68,109. The tax rate is 24 percent and the discount rate is 12 percent. What is the amount of the annual depreciation tax shield? Ignore bonus depreciation.

A project has cash flows of −$152,000, $60,800, $62,300, and $75,000 for Years 0 to 3, respectively. The required rate of return is 13 percent. What is the profitability index? Should you accept or reject the project based on this index value?

Ives Corporation has an inventory period of 23.1 days, an accounts payable period of 40.7 days, and an accounts receivable period of 33.5 days. What is the company’s cash cycle?

The company places orders each quarter that are 56 percent of next quarter’s sales and has a 30-day payables period. The projected sales for next year are: Q1 Q2 Q3 Q4 Sales $ 54,225 $ 60,975 $ 69,525 $ 75,050 What is the accounts payable balance at the end of the second quarter?

In an effort to capture the large jet market, Hiro Airplanes invested $11.264 billion developing its B490, which is capable of carrying 840 passengers. The plane has a list price of $276.5 million. In discussing the plane, Hiro Airplanes stated that the company would break even when 253 B490s were sold. Assume the break-even sales figure given is the cash flow break-even. Suppose the sales of the B490 last for only 12 years. How many airplanes must Hiro sell per year to provide its shareholders a rate of return of 17 percent on this investment?

Dora Distribution has projected the following quarterly sales. The accounts receivable at the beginning of the year is $1,045 and the collection period is 60 days. What are collections for the first quarter? Q1 Q2 Q3 Q4 Sales $ 1,735 $ 1,780 $ 2,145 $ 2,150