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FINA 230 - Introduction to Financial Management (Winter 2025)

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A new, more efficient machine will last four years and allow inventory levels to decrease by $100,000 during its life. At a cost of capital of 13 percent, how does the net working capital change affect the project's NPV?

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A project that increased sales was accompanied by a $50,000 increase in inventory, a $20,000 increase in accounts receivable, and a $25,000 increase in accounts payable. Assuming these amounts remain constant, by how much has net working capital increased?

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Allocations of overhead should not affect a project's incremental cash flows unless the:

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If a project's cash flows include those triggered outside the project's incremental cash flows, it is likely that the:

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A five-year project requires an additional commitment of $100,000 in net working capital. What is the present value opportunity cost associated with this investment?

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The Golf Range is considering adding an additional driving range to its facility. The range would cost $229,000, would be depreciated on a straight-line basis over its seven-year life, and would have a zero salvage value. The anticipated revenue from the project is $62,500 a year with $18,400 of that amount being variable cost. The fixed cost would be $15,700. The firm believes that it will earn an additional $22,500 a year from its current operations should the driving range be added. The project will require $3,000 of net working capital, which is recoverable at the end of the project. What is the internal rate of return on this project at a tax rate of 21 percent?

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Capital budgeting projects typically assume that all cash flows transpire at the end of the year. The reason for this is that:

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At current prices and a 13 percent cost of capital, a project's NPV is $100,000. By what minimum amount must the initial cost of the project decrease (revenues will be unchanged) before you would prefer to wait two years before investing?

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How does net working capital affect the NPV of a five-year project if working capital is expected to increase by $25,000 and the firm has a 15% cost of capital?

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A parcel of corporate land was recently dedicated as the new plant site. What cost allocation should the land receive, based on the following: original cost of $200,000, market value of $300,000, net book value of $200,000, a recent offer to purchase for $250,000?

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