Finance for Non-Finance Professionals Week 3 Quiz 2

quiz4.txt

1.
Question 1
An increase in net working capital means 

1 point

An increase in cash


### A decrease in cash


No change in cash

2.
Question 2
A company has an operating income of $100 million, no depreciation, an asset sale of $50 million, a capital expenditure of $10 million, and no changes in net working capital. Calculate this company’s free cash flow for the year.

1 point

$145 million


### 140 million = 100+50-10


$135 million


$155 million

3.
Question 3
A project requires an initial investment of $1.4 million. This initial investment is to be depreciated straight-line to 0 in 3 years. What is the annual depreciation amount?

1 point

### $466,666.67 = 1.4/3


$333,333.33


$500,000


$666,666.67

4.
Question 4
Suppose the investment described above generates an annual sales of $1,120,000, with annual costs of $480,000. Assume a tax rate of 35%. What is the tax to be paid on annual sales?

1 point

$274,000


$250,000


 ### $224,000 = (1120000-480000)*.35

5.
Question 5
What would be the tax savings from depreciation?

1 point

$200,000


### $163,333.33 = 466,666.67*.35


$178,666.67

6.
Question 6
What is the annual operating cash flow from this project?

1 point

$780,000


$466,666.67


### $579,333.33 = 1120000-480000-224000+163,333.33

7.
Question 7
Suppose company XYZ has revenues of $500 million, cost of goods sold of $300 million, and depreciation of $100 million. What is the company’s EBIT?

1 point

### $100 million = 500-300-100


$200 million


$300 million


$400 million

8.
Question 8
Suppose XYZ also pays a 30% tax. What would be the company’s NOPAT?

1 point

### $70 million 100-(100*.3)


$100 million


$130 million

9.
Question 9
Company XYZ has, in addition, an increase in net working capital of $50 million, and capital expenditure of $10 million. What is XYZ’s FCF?

1 point

### $110 million = 70 (NOPAT) + 100 (depreciation) - 50 (NWC net working capital) - 10 (CAPEX)


$100 million


$90 million