1. Which of the following statements is FALSE?
A) A capital budget lists the projects and investments that a company plans to undertake during the coming year.
B) Income Tax = EBIT × (1 - τc).
C) When sales of a new product displace sales of an existing product, the situation is often referred to as cannibalization.
D) Overhead expenses are often allocated to the different business activities for accounting purposes.
2. Which of the following statements is FALSE?
A) Because value is lost when a resource is used by another project, we should include the opportunity cost as an incremental cost of the project.
B) Sunk costs are incremental with respect to the current decision regarding the project and should be included in its analysis.
C) Overhead expenses are associated with activities that are not directly attributable to a single business activity but instead affect many different areas of the corporation.
D) When computing the incremental earnings of an investment decision, we should include all changes between the firm's earnings with the project versus without the project.