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1. For the next 8 questions suppose the following data holds:

IBC, Inc. is considering the purchase of a $320,000 computer that has an economic life of 5 years. The computer will be depreciated according to 5-year MACRS schedule (20%, 32%, 19.2%, 11.52%, 11.52%, and 5.76%). The market value of the computer will be $60,000 in 5 years. The use of computer will save annual costs of $120,000 for the next five years. For simplicity, these cost savings are assumed to occur at the end of these years. As a result of this project, the net working capital will increase by $60,000 immediately, and it will be recovered at the end of year 5. The firms tax rate is 40% and its cost of capital is 12%.

3. What is the initial investment requirement (t=0)?

		$240,000
		$260,000
		$280,000
		$320,000
		$380,000

1 points

QUESTION 67

1. What is the operating cash flow one year from today (t=1)?

		$85,824
		$90,924
		$97,600
		$99,500
		$105,200

1 points

QUESTION 68

1. What is the operating cash flow two years from today (t=2)?

		$88,820
		$95,940
		$98,040
		$105,250
		$112,960

1 points

QUESTION 69

1. What is the operating cash flow three year from today (t=3)?

		$85,824
		$90,924
		$95,040
		$96,576
		$109,405

1 points

QUESTION 70

1. What is the operating cash flow four years from today (t=4)?

		$86,746
		$93,478
		$95,040
		$96,245
		$110,400

1 points

QUESTION 71

1. How much tax is the firm expected to pay when the asset is sold for $60,000 in year 5?

		$10,543
		$12,671
		$16,627
		$17,088
		$19,233

1 points

QUESTION 72

1. What is the total cash flow five year from today (t=5)?

		$127,431
		$130,313
		$142,452
		$179,824
		$190,118

1 points

QUESTION 73

1. What is the project's NPV?

		$19,125
		$28,941
		$33,231
		$55,254
		$72,336

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