The net present value is the ratio of a project's benefits to its costs and the profitability index is the difference between a project's benefits and its costs.
Indicate whether the statement is true or false
The manager's main responsibility to the parent organization be it the owner or corporate office is to protect the assets entrusted to him/her.
Indicate whether the statement is true or false
The discounted payback period does not take into account the time value of money.
Indicate whether the statement is true or false
Peter Jones and Andrew Lockwood identify the manager's job as responding only to the needs of guests and of the organization (either the owner or the corporate office).
Indicate whether the statement is true or false
A firm is planning a project that will both expand the firm's operations and replace some of the older, less efficient assets of the firm.
The new assets will cost the firm 200,000 plus an additional 5,000 for delivery and 25,000 for installation. Old assets being replaced have a book value of 50,000 and can be sold pre-tax for 40,000. The new project will require additional land. The land to be used was purchased three years ago for 75,000 but could be sold today for 140,000 net of taxes. The new project will require an increase of 20,000 in net working capital immediately. What is this project's net investment? Use 40 for the effective tax rate.
A) 350,000
B) 281,000
C) 390,000
D) 346,000
A project is expected to decrease a firm's cash expenses by 40,000 annually, and increase its depreciation by 25,000 annually. Given this information, what is the project's expected annual net cash flow? Use a 40 effective tax rate.
A) 31,000
B) 9,000
C) 16,000
D) 34,000
A project is expected to increase a firm's sales revenue by 12,000 annually, decrease it cash expenses by 18,000 annually, and increase its depreciation by 10,000 annually.
Given this information, what is the project's expected annual net cash flow? Use a 40 effective tax rate.
A) 400
B) 12,000
C) 22,000
D) 18,000
A project is expected to increase a firm's sales revenue by 50,000 annually, increase it cash expenses by 20,000 annually, and increase its depreciation by 15,000 annually.
Given this information, what is the project's expected annual net cash flow? Use a 40 effective tax rate.
A) 24,000
B) 9,000
C) 21,000
D) 33,000
Spencers Majestic Foods is considering the replacement of some old equipment. The new equipment will cost 300,000 including delivery and installation.
The old equipment to be replaced has a book value of 100,000 and can be sold pre-tax for 120,000. If the firm's effective tax rate is 40, compute the net investment.
A) 192,000
B) 188,000
C) 180,000
D) 228,000
Jose's Cantinas Incorporated plans to expand. This will require the acquisition of new equipment. The equipment will cost 85,000 including delivery and installation. Additional net working capital of 25,000 will be needed immediately.
Land for the expansion cost Jose's 100,000 three years ago, but could be sold to net 200,000 after taxes today. Compute the net investment for this project.
A) 185,000
B) 310,000
C) 210,000
D) 285,000
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