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.
