Principles of Finance Questions...Can someone help?

Question

Calculate cash flows from operations given the following information: Sales = $1,000, Costs (other than depreciation = $400, Depreciation = $100, Tax rate = 30%.

Calculate the depreciation tax shield for an asset that costs $100,000 and is depreciated over 10 years using straight line depreciation if the firm’s tax rate is 30%.

What is the abandonment option in the context of capital budgeting?

Answer 1

Your Cash Inflow is $1000 and your Outflow is $550 (400 + tax of 150) so your Net Cash Flow is $450.  Tax was calculated as 30% of the income (1000-400-100) which is $150

The depreciation tax shield is $3000, computed as follows: $100000/10 yrs x 30%.

Sorry, I forgot what abandonment option is .