Finc322: Exam 2 Questions And Answers 100% Verified 2024

For project Z, year 5 inventories increase by $6000, accounts receivable by $4000, and accounts payable by $3000. Calculate the increase/decrease in working capital for year 5. {Ans: Increase by $7000}You are given the following data for Year 1: Revenues = $43, Total Costs = $30. Depreciation = $3. Tax rate is 30%. Calculate the operating cash flow for the project in Year 1. {Ans: $10}Project Y has the following cash flows: C0 = -$800; C1 = +$5000; C2 = -$5000. Calculate the IRR's for the project. {Ans: 25% and 400%}The real interest rate is 3% and the inflation rate is 5%. What is the nominal interest rate? {Ans: 8.15%}Working capital is a frequent source of errors in estimating project cash flows. These errors include: {Ans: forgetting about working capital entirely, forgetting that working capital may change during the life of the project, and forgetting that working capital is recovered at the end of the project.}Accountants to not depreciate investment in net working capital because: {Ans: it is recovered during or at the end of the project, thus it is not a depreciating asset.}