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Missouri State-FIN 380- NWC, Inc, is considering a seven-year project
September 22nd, 2018 by admin
1- NWC, Inc, is considering a seven-year project that has the potential to result in additional accounts receivable of $120,000, additional inventory of $30,000, and additional accounts payable of $70,000 today. Assume a 12% discount rate, and the typical expected recovery of the NWC investment. What is the change in the NPV of a project solely due to the additional net working capital (NWC) needs? a) A decrease of $120,483b) A decrease of $99,517c) A decrease of $36,188d) No change since the investment is full recovered.Rainbow Industries has a proposed project with expected annual sales of 100 units at $500 each. This will reduce annual sales of Rainbow’s exsiting projects by 20 units that sold for $400 each. Total firm-wide expense will remain unchanged, but the new project will be allocated $20,000 per year in preexisting overhead. Ignoring taxes, depreciation and other information not provided above, what is the incremental annual cash flow associated with this project for capital budgeting purpose?$22,000$42,000$52,00060,000None of the above. everything else equal, recording depreciation expense:A. Does not influence operating cash flow because it is a non-cash deduction.B. Increases operating cash flow due to the “depreciation tax shield”.C. Decreases operating cash flow because it reduces net income.D. non of the aboveAssume that a firm has no capital rationing constraint. All of the following are sufficient indications to accept a project EXCEPT:The net present value of an independent project is positiveAn independent projectâs only IRR exceeds the required rate of returnThe IRR of a mutually exclusive project is higher than the IRR of all other projectsThe NPV of a mutually exclusive project is positive and exceeds that of all other projectsCan anyone answer these questions and explain it as well?
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