If the federal income tax rate were increased, the impact of the tax increase on acceptable investment proposals

If the federal income tax rate were increased, the impact of the tax increase on acceptable investment proposals would be to (ignore the impact of the tax change on the cost of capital)

A) decrease the tax shelter from depreciation.

B) decrease net present value but the internal rate of return would stay the same.

C) increase net present value because the tax shelter from interest and depreciation becomes more valuable.

D) decrease both net present value. and internal rate of return.

Which of the following would increase the net working capital for a project? An increase in

A) accounts receivable.

B) fixed assets.

C) accounts payable.

D) common stock.

Which of the following should be included in the initial outlay?

A) Shipping and installation costs

B) Increased working capital requirements

C) Cost of employee training associated specifically with the asset being evaluated

D) All of the above

Depreciation expenses affect capital budgeting analysis by increasing

A) taxes paid.

B) incremental cash flows.

C) the initial outlay.

D) working capital.

Which of the following is included in the terminal cash flow?

A) The expected salvage value of the asset

B) Tax impacts from selling assets

C) Recapture of any working capital

D) All of the above

A firm purchased an asset with a 5-year life for $90,000, and it cost $10,000 for shipping and installation. According to the current tax laws the cost basis of the asset at time of purchase is

A) $100,000.

B) $95,000.

C) $80,000.

D) $70,000.

Which of the following is NOT one of the categories for a project's relevant after-tax cash flows?

Incremental cash flows from a project =

A) Firm cash flows without the project plus or minus changes in net income.

B) Firm cash flows with the project plus firm cash flows without the project.

C) Firm cash flows with the project minus firm cash flows without the project.

D) Firm cash flows without the project plus or minus changes in revenue with the project.

Which of the following is NOT one of the categories for a project's relevant after-tax cash flows?

A) Financing flows

B) Initial cash outflow

C) Differential flows over the project's life

D) Terminal cash flow

Which of the following is NOT part of a project's initial cash outflow?

A) The asset's purchase price

B) Funds committed to support increased inventory levels due to expected increased sales if the firm adopts the project

C) A marketing survey completed last year to determine the project's feasibility

D) Expenses incurred to install the asset

Relevant incremental cash flows include

A) sales captured from the firm's competitors.

B) retained sales that would have been lost to new competing products.

C) incremental sales brought to the firm as a whole.

D) all of the above.

Which of the following is NOT considered in the calculation of incremental cash flows?

A) Depreciation tax shield

B) Sunk costs

C) Opportunity costs

D) Both A and B

Which of the following cash flows should be included as incremental costs when evaluating capital projects?

A) Investment in working capital that is directly related to a project

B) Expenses that are incurred in order to modify a firm's production facility in order to invest in a project

C) Opportunity costs that are directly related to a project

D) All of the above

Depreciation expenses affect tax-related cash flows by

A) increasing taxable income, thus increasing taxes.

B) decreasing taxable income, thus reducing taxes.

C) decreasing taxable income, but not altering cash flows since depreciation is not a cash expense.

D) all of the above.