Question And Problem Sets

**Purpose of Assignment**

Students should understand and be able to calculate the net present value and internal rate of return for corporate cash flows, determine project cash flows and a company’s sales, variable costs, fixed costs, and its breakeven point.

**Assignment Steps**

**Resources:** Tutorial help on Excel® and Word® functions can be found on the Microsoft®Office website. There are also additional tutorials via the web that offer support for office products.

**Complete** the following Questions and Problems from each chapter as indicated.

**Show** all work and analysis.

**Prepare** in Microsoft® Excel® or Word.

- Ch. 9: Questions 7 & 8 (Questions and Problems section)

Question 7:

** Calculating IRR** **[LO5]** A firm evaluates all of its projects by applying the IRR rule. If the required return is 14 percent, should the firm accept the following project?

Question 8: ** Calculating NPV** **[LO1]** For the cash flows in the previous problem, suppose the firm uses the NPV decision rule. At a required return of 11 percent, should the firm accept this project? What if the required return is 24 percent?

- Ch. 10: Questions 3 & 13 (Questions and Problems section)

Question 3: **Calculating Projected Net Income** **[LO1]** A proposed new investment has projected sales of $635,000. Variable costs are 44 percent of sales, and fixed costs are $193,000; depreciation is $54,000. Prepare a pro forma income statement assuming a tax rate of 35 percent. What is the projected net income?

Question 13: **Project Evaluation** **[LO1]** Dog Up! Franks is looking at a new sausage system with an installed cost of $540,000. This cost will be depreciated straight-line to zero over the project’s five-year life, at the end of which the sausage system can be scrapped for $80,000. The sausage system will save the firm $170,000 per year in pretax operating costs, and the system requires an initial investment in net working capital of $29,000. If the tax rate is 34 percent and the discount rate is 10 percent, what is the NPV of this project?

- Ch. 11: Questions 1 & 7 (Questions and Problems section)

Question 1:

**Calculating Costs and Break-Even** **[LO3]** Night Shades, Inc. (NSI), manufactures biotech sunglasses. The variable materials cost is $9.64 per unit, and the variable labor cost is $8.63 per unit.

**a.** What is the variable cost per unit?

**b.** Suppose NSI incurs fixed costs of $915,000 during a year in which total production is 215,000 units. What are the total costs for the year?

**c.** If the selling price is $39.99 per unit, does NSI break even on a cash basis? If depreciation is $465,000 per year, what is the accounting break-even point?

Question 7:

**Calculating Break-Even** **[LO3]** In each of the following cases, calculate the accounting break-even and the cash break-even points. Ignore any tax effects in calculating the cash break-even.

**Format** your assignment consistent with APA guidelines if submitting in Microsoft® Word.