1. As a member of Gamma Corporation's financial staff, you must estimate the Year 1 operating net cash flow for a proposed project with the following data. What is the Year 2 operating cash flow?
EBT: $12,000
Depreciation: $3,500
Interest Expense: $1,000
Tax Rate: 40%
2. A firm has undertaken a feasibility study to evaluate a project that has the following estimated cashflows:
Increased sales to business of $140,000 for the next 5 years (starting in one year's time)Increased costs of $20,000 for the next two years (starting in one year's time)The initial capital expenditure required is $100,000.The study cost $10,000 to conduct.
-Amount borrowed to fund project is $200,000 with interest of 8% pa paid yearly.
If the firm is facing a discount rate of 10%, what is the NPV of this project?
a. $395,999
b. $516,155
c. $455,420
d. $506155