FIN 571 NERD Education Specialist /fin571nerd.com FIN 571 NERD Education Specialist /fin571nerd.com | Page 9

purchase of a $11,000 soufflé maker. The soufflé maker has an
economic life of four years and will be fully depreciated by the
straight-line method. The machine will produce 2,500 soufflés per
year, with each costing $2.90 to make and priced at $5.75. Assume
that the discount rate is 16 percent and the tax rate is 34 percent. What
is the NPV of the project? (Do not round intermediate calculations
and round your answer to 2 decimal places, e.g., 32.16.) 44. Down
Under Boomerang, Inc., is considering a new three-year expansion
project that requires an initial fixed asset investment of $2.64 million.
The fixed asset will be depreciated straight-line to zero over its three-
year tax life, after which it will be worthless. The project is estimated
to generate $2,060,000 in annual sales, with costs of $755,000. The
tax rate is 35 percent and the required return is 13 percent. What is the
project’s NPV? (Do not round intermediate calculations and round
your answer to 2 decimal places, e.g., 32.16.) 45. What is the net
present value of a project with an initial cost of $36,900 and cash
inflows of $13,400, $21,600, and $10,000 for Years 1 to 3,
respectively? The discount rate is 13 percent.
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FIN 571 Final Exam Guide (New)
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1.A proxy fight occurs when: the board of directors disagree on the
members of the management team. 2. A stakeholder is any person or
entity: 3.Which one of the following is least apt to help convince
managers to work in the best interest of the stockholders? threat of a
proxy fight pay raises based on length of service implementation of a
stock option plan 4.Financial managers primarily create firm value
by: maximizing current sales. investing in assets that generate cash in
excess of their cost. 5.First City Bank pays 7 percent simple interest
on its savings account balances, whereas Second City Bank pays 7
percent interest compounded annually. If you made a $59,000 deposit
in each bank, how much more money would you earn from your
Second City Bank account at the end of 9 years? (Do not round
intermediate calculations and round your answer to 2 decimal places,