1. Modern Flooring is considering a new product line. The new line would require $134,000 of fixed assets and net working capital of $24,000. The firm will apply straight-line depreciation over three years to the fixed assets. The new line is expected to produce an operating cash flow of $35,000 the first year with that amount decreasing by 10 percent annually for two years before the new line will be discontinued. The fixed assets can be sold for $25,000 at the end of the project and all net working capital will be recovered. What is the net present value of the new line at a discount rate of 11.5 percent and a tax rate of 35 percent?
A. −$31,209.17
B. $15,311.09
C. –$36,054.48
D. $48,548.67
2. A participant in a Simplified Employee Pension (SEP):
a. Cannot participate in any other qualified retirement plans.
b. Can participate in other qualified retirement plans sponsored by his employer.
c. Can participate in a defined contribution plan but not a defined benefit plan.
d. Is prohibited from participating in a Section 1035 exchange program.