1. Lyndon Company has been offered a contract to build a bridge for the state of Michigan. The contract would expire in ten years.

The projected cash flows that result from the contract are given below:

•Cost of equipment $500,000

•Working capital needed $100,000

•Net annual cash inflows $80,000

•Salvage value of equipment in ten years $40,000

•Working capital released $100,000

•The company's required rate of return and discount rate is 12%.

•The working capital would be released at the end of project.

What is the present value of the salvage value of the equipment?

a. $12,880

b. $40,000

c. $100,000

d. $226,008

2. ? Lyndon Company has been offered a contract to build a bridge for the state of Michigan. The contract would expire in ten years.

The projected cash flows that result from the contract are given below:

•Cost of equipment $500,000

•Working capital needed $100,000

•Net annual cash inflows $80,000

•Salvage value of equipment in ten years $40,000

•The company's required rate of return and discount rate is 12%.

The working capital would be released at the end of project. What is the present value of the annual cash inflows?

a. $25,760

b. $80,000

c. $100,000

d. $452,016

3. Lyndon Company has been offered a contract to build a bridge for the state of Michigan. The contract would expire in ten years.

The projected cash flows that result from the contract are given below:

•Cost of equipment $500,000

•Working capital needed $100,000

•Net annual cash inflows $80,000

•Salvage value of equipment in ten years $40,000

•The company's required rate of return and discount rate is 12%.

The working capital would be released at the end of project. What is the present value of the working capital needed?

a. $32,200

b. $(32,200)

c. $100,000

d. $(100,000)

4. Lyndon Company has been offered a contract to build a bridge for the state of Michigan. The contract would expire in ten years. The projected cash flows that result from the contract are given below:

•Cost of equipment $500,000

•Working capital needed $100,000

•Net annual cash inflows $80,000

•Salvage value of equipment in ten years $40,000

•The company's required rate of return and discount rate is 12%.

The working capital would be released at the end of project. What is the present value of the cost of the equipment?

a. $446,450

b. $500,000

c. $(446,450)

d. $(500,000)