HĐVNSĐT

A cost that has already been paid, or a liability to pay that has already been incurred, is classified as a:

• opportunity cost.

• b.

  erosion cost.

• c.

  salvage value expense.

• d.

  net working capital expense.

• e.

  sunk cost.

A project's operating cash flow will increase when the:

• e.

  interest expense is lowered.

• d.

  depreciation expense increases.

• c.

  net working capital requirement increases.

• b.

  earnings before interest and taxes decreases.

• a.

  sales projections are lowered.

All of the following are anticipated effects of a proposed project. Which of these should be considered when computing the cash flow for the final year of the project?

• a.

  Salvage values and net working capital recovery only

• d.

  Operating cash flow, net working capital recovery, salvage values

• c.

  Operating cash flow and salvage values only

• b.

  Operating cash flow only

• e.

  Net working capital recovery and operating cash flow only

Assume a project will increase inventory by $61,000, accounts payable by $28,000, and accounts receivable by $36,000. What is the initial net working capital requirement for this project?

• 
  $69,000

• b.

  $97,000

• c.

  $125,000

• d.

  $59,000

• e.

  $53,000

Ben's Border Café is considering a project that will produce sales of $16,000, increase cash expenses by $10,000, increase taxes by $950, and increase depreciation by $1,500 for each year of the project's 9-year life. What is the amount of the annual operating cash flow using the top-down approach?

• 
  $7,550

• $6,100

• $4,550

• 
  $5,050

• $3,550

Changes in the net working capital:

• 
  are included in project analysis only if they represent cash outflows.

• 
  are generally excluded from project analysis due to their irrelevance to the total project.

• can affect the cash flows of a project every year of the project's life.

• 
  only affect the initial cash flows of a project.

• 
  can only affect the initial and the final cash flows of a project.

Custom Cars purchased $39,000 of fixed assets two years ago that are classified as 5-year MACRS property. The MACRS rates are 20 percent, 32 percent, 19.2 percent, 11.52 percent, 11.52 percent, and 5.76 percent for Years 1 to 6, respectively. The tax rate is 21 percent. If the assets are sold today for $19,000, what will be the aftertax cash flow from the sale? Ignore bonus depreciation.

• a.

  $18,941.20

• b.

  $17,909.09

• c.

  $16,358.88

• d.

  $19,000.00

• e.

  $18,720.00

Erosion can be explained as the:

• a.

  loss of revenue due to customer theft.

• b.

  loss of revenue due to employee theft.

• c.

  additional income generated from the sales of a newly added product.

• d.

  decrease in expected annual revenues as a new product ages.

• e.

  loss of current sales due to a new project being implemented.

Sunk costs include any cost that:

• a.

  has previously been incurred and cannot be changed.

• b.

  will occur if a project is accepted and once incurred, cannot be recouped.

• c.

  will be incurred if a project is accepted.

• d.

  will change if a project is undertaken.

• e.

  will be paid to a third party and cannot be refunded for any reason whatsoever.

The book value of an asset is primarily used to compute the:

• a.

  amount of tax due on the sale of that asset.

• b.

  annual depreciation tax shield.

• c.

  change in depreciation needed to reflect the market value of the asset.

• d.

  amount of tax saved annually due to the depreciation expense.

• e.

  amount of cash received from the sale of the asset.