Question

Craig's Car Wash Inc. is considering a project that has the following cash flow and cost of capital (r) data. What is the project's discountedpayback?

r.	10.00%
Year	0	1	2	3
Cash flows	−$900	$500	$500	$500

a. 2.09 years

b. 1.88 years

c. 2.52 years

d. 2.78 years

e. 2.29 years

You have just landed an internship in the CFO's office of Hawkesworth Inc. Your first task is to estimate the Year 1 cash flow for a project with the following data. What is the Year 1 cash flow?

Sales revenues	$13,000
Depreciation	$4,000
Other operating costs	$6,000
Tax rate	35.0%

a. $5,950

b. $6,407

c. $6,251

d. $6,099

e. $6,568

Your new employer, Freeman Software, is considering a new project whose data are shown below. The equipment that would be used has a 3-year tax life, and the allowed depreciation rates for such property are 33.33%, 44.45%, 14.81%, and 7.41% for Years 1 through 4. Revenues and other operating costs are expected to be constant over the project's 10-year expected life. What is the Year 1 cash flow?

Equipment cost (depreciable basis)	$65,000
Sales revenues, each year	$60,000
Operating costs (excl. deprec.)	$25,000
Tax rate	35.0%

a. $33,442

b. $36,869

c. $31,849

d. $35,114

e. $30,333

Answer 1