Jake's Tree Farm Is Evaluating a Proposal to Plant 5,000

question 2

Multiple Choice

Jake's Tree farm is evaluating a proposal to plant 5,000 ornamental trees at an initial cost of $10,000. The trees will be sold in 5 years. What is the minimum after tax cash flow from selling the trees that will allow the tree planting project to reach break even NPV? Use a discount rate of 12%.

• A) $12,000.00
• B) $5,674.26
• C) $17,623.42
• D) $17,958.56

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Definitions:

ROEs

Return on Equity, an indicator of financial efficiency determined by dividing a company's net income by its shareholders' equity, reflects how well management utilizes company assets to generate earnings.

Capital Structure

The mix of a company's long-term debt, specific short-term debt, common equity, and preferred equity that it uses to finance its overall operations.

Current Assets

Current Assets are all assets of a company that are expected to be sold, used, or consumed within one year in the normal course of business.

Cash Budget

A financial plan that estimates cash inflows and outflows over a specific period, often used for managing liquidity and ensuring a company can meet its short-term obligations.