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A new HVAC system will require an initial outlay of $16,500

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Question

A new HVAC system will require an initial outlay of $16,500, but it will

increase the firm’s cash flows by $3,300 a year for each of the next 6 years.

a. Calculate the NPV if the required rate of return is 8%

b.Calculate the NPV if the required rate of return is 13%

c. if you were to reject the project before how high can the discount rate be?

 
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profitability

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Question

If the opportunity cost of capital is 12% what is the profitability index for

project AB and Project AC?

Years Project AB Project AC

0 -270 -270

1 150 170

2 150 170

3 150 170

4 150 170

 
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depreciation

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Question

$120 each will be sold at Barnes. $1,800 per year are the non depreciation

fixed costs, and $70 per unit are the variable costs. The initial investment of $5,400 will be depreciated straight-line over its useful life of 6 years to a final value of zero, and 18% is the discount rate.

a.

When the sales are $7440.00 what is the degree of operating leverage?

b.

When sales are $12000.00 what is the degree of operating leverage?

 
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sales

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Question

A business currently generates $7 million in sales. the variable costs equal

60% of sales and $1.4 million are the fixed costs. 40% is the firms tax rate.

a.If sales increase from $7 million to $7.7 million what is the effects on the cash flow?

b. If the variable costs increase to 65% of sales what is the effects on the cash flow?

 
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