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[answered] Brown Mack, Inc., currently has two large manufacturing div


1.Brown Mack,?Inc.,?currently has two large manufacturing divisions that share a single plant.?Brown Mack owns the plant but has calculated that?$6,000,000?of overhead expenses should be allocated to the two equal-sized divisions.?If Brown Mack starts a third manufacturing division,?of equal size to the other two divisions,?then what overhead cost should the new division take into account on its capital budgeting cash flow analysis?

$0

$2,000,000

$3,000,000

$6,000,000


2.

Which of the following statements is correct?

Incremental net operating profits after-tax should include sunk costs associated with a project.

Incremental net operating profits after-tax should include the effects of financing costs associated with a project.

Incremental net operating profits after-tax should exclude the effects of depreciation costs associated with a project.

Incremental net operating profits after-tax should exclude the effects of financing costs associated with a project.


3.

If you are deciding whether to take one project or another, where the projects have different useful lives, then you could utilize:

an?equivalent?sample?path?analysis.

an?equivalent?annual?tax?return?analysis.

an equivalent annual cost analysis.

an equivalent annual concussion analysis.


4.You are the CFO of SlimBody, Inc., a retailer of the exercise machine Slimbody6? and related accessories.? Your firm is considering opening up a new store in Tempe.? The store will have a life of 20 years.? It will generate annual sales of 5,000 exercise machines, and the price of each machine is $2,500.? The annual sales of accessories will be $600,000, and the operating expenses of running the store, including labor and rent, will amount to 50 percent of the revenues from the exercise machines.? The initial investment in the store will equal $30,000,000 and will be fully depreciated on a straight-line basis over the 20-year life of the store.? Your firm will need to invest $2,000,000 in additional working capital immediately, and recover it at the end of the investment.? Your firm?s marginal tax rate is 30 percent.? The cost of capital is 10 percent.? What is the NPV for the new store opening?
(1)

 

$2,000,000

 

(2)

 

Incremental net operating profits after-tax should exclude the effects of financing costs associated with a project.

 

(3)

 

an equivalent annual cost analysis.

 

(4)

 

Cost of machine...

 


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