公司财务管理题库3.doc

公司财务管理题库3.doc

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PARTIII

1.TheFlemingCompany,afooddistributor,isconsideringreplacingafillinglineatitsOklahomaCitywarehouse.Theexistinglinewaspurchasedseveralyearsagofor$600,000.Theline’sbookvalueis$200,000,andFlemingmanagementfeelsitcouldbesoldatthistimefor$150,000.Anew,increasedcapacitylinecanbepurchasedfor$1,200,000.Deliveryandinstallationofthenewlineareexpectedtocostanadditional$100,000.AssumingFleming’smarginalrateis40percent,calculatethenetinvestmentforthenewline.

2.InternationalFoodsCorporation（IFC）currentlyprocessesseafoodwithaunititpurchasedseveralyearsago.Theunit,whichoriginallycost$500,000,currentlyhasabookvalueof$250,000.IFCisconsideringreplacingtheexistingunitwithanewer,moreefficientone.Thenewunitwillcost$700,000andwillrequireanadditional$50,000fordeliveryandinstallation.ThenewunitalsowillrequireIFCtoincreaseitsinvestmentininitialnewworkingcapitalby$40,000.Thenewunitwillbedepreciatedonastraight-linebasisover5yearstoazerobalance.IFCexpectstoselltheexistingunitfor$275,000.IFC’smarginaltaxrateis40percent.

IfIFCpurchasethenewunit,annualrevenuesareexpectedtoincreaseby$100,000（duetoincreasedprocessingcapacity）,andannualoperatingcosts（exclusiveofdepreciation）ateexpectedtodecreaseby$20,000.Annualrevenuesandoperatingcostsareexpectedtoremainconstantatthisnewleveloverthe5-yearlifeoftheproject.IFCestimatesthatitsnetworkingcapitalinvestmentwillincreaseby$10,000peryearoverthelifeoftheproject.After5years,thenewunitwillbecompletelydepreciatedandisexpectedtobesoldfor$70,000.（Assumethattheexistingunitisbeingdepreciatedatarateof$50,000peryear.）

a.Calculatetheproject’snetinvestment.

b.Calculatetheannualnetcashflowsfortheproject.

3.Nguyen,Inc.isconsideringthepurchaseofanewcomputersystem（ICX）for$130,000.Thesystemwillrequireanadditional$30,000forinstallation.Ifthenewcomputerispurchaseditwillreplaceanoldsystemthathasbeenfullydepreciated.Thenewsystemwillbedepreciatedoveraperiodof10yearsusingstraight-linedepreciation.IftheICXispurchased,theoldsystemwillbesolefor$20,000.TheICXsystem,whichhasausefullifeof10years,isexpectedtoincreaserevenuesby$32,000peryearoveritsusefullife.Operatingcostsareexpectedtodecreaseby$2,000peryearoverthelifeofthesystem.Thefirmistaxedata40percentmarginalrate.

a.WhatnetinvestmentisrequiredtoacquiretheICXsystemandreplacetheoldsystem?

b.ComputetheannualnetcashflowsassociatedwiththepurchaseoftheICXsystem.

4.Benford,Inc.isplanningtoopenanewsportinggoodsstoreinasuburbanmall.Benfordwillleasetheneededspaceinthemall.Equpmentandfixtureforthestorewillcost$200,000andbedepreciatedovera5-yearperiodonastraight-linebasisto$0.ThenewstorewillrequireBenfordtoincreaseitsnetworkingcapitalby$200,000attime0.First-yearsalesareexpectedtobe$1millionandtoincreaseatanannualrateof8percentovertheexpected10-yearlifeofthestore.Operatingexpenses（includingleasepaymentsandexcludingdepreciation）areprojectedtobe$700,000duringthefirstyearandincreaseata7percentannualrate.Thesalvagevalueofthestore’sequipmentandfixtureisanticipatedtobe$10,000attheendof10Years.Benford’smarginaltaxrateis40percent.

a.ComputethenetinvestmentrequiredforBenford.

b.Computetheannualnetcashflowsforthe10-yearprojectedlifeofthestore.

5.Calculatethenetpresentvalueofaprojectwithanetinvestmentof$20,000forequipmentandanadditionalnetworkingcapitalinvestmentof$5,000attime0.Theprojectisexpectedtogeneratenetcashflowsof$7,000peryearovera10-yearestimatedeconomiclife.Inaddition,thenetworkingcapitalwillberecoveredattheendoftheproject.Therequiredreturnontheprojectis11percentandthecompanyhasamarginaltaxrateof40percent.Whatisthemeaningofthecomputednetpresentvaluefigure?

6.Calculatetheinternalrateofreturnandprofitabilityindexforaprojectthatisexpectedtogenerate8yearsofannualnetcashflowsof$75,000.Theprojecthasanetinvestmentof$360,000andtherequiredreturnontheprojectis12percent.

7.Twomutuallyexclusiveprojectshavethefollowingexpectedcashflow:

Year

G

H

0

1

2

3

-$10,000

5,000

5,000

5,000

-$10,000

0

0

17,000

a.Calculatetheinternalrateofreturnforeachproject.

b.Calculatethenetpresentvalueforeachproject,assumingthefirm’sweightedcostofcapitalis12percent.

c.Whichprojectshouldbeadopted?

Why?

8.JeffersonProducts,Inc.,isconsideringpurchasinganewautomaticpre