1. In terms of the capital budgeting process, net cash flows are
a) the net cash outlays required to place a project in service
b) the funds invested in additional assets
c) incremental changes in a firm's cash flow
d) the outlays that have already been made
2. The following data is associated with a proposed replacement project:
A machine that originally cost $25,000 and was depreciated on a straight line basis has one year of its expected 5-year life remaining. Its current market value is $12,000. The corporate tax rate is 34%. The cash flow from disposing of the old machine is:
a) $12,000
b) $9,620
c) ($ 9,620)
d) $14,380
3. What is the after-tax cash flow that results from the sale for $150,000 of a capital asset that has a book value of $200,000, given a 40% tax rate?
a) $150,000
b) $130,000
c) $90,000
d) $170,000
e) $120,000
4. Shunt Technology will spend $800,000 on a piece of equipment that will manufacture fine wire for the electronics industries. The shipping and installation charges will be $240,000 and net working capital will increase $48,000. The equipment will replace an existing machine that has a salvage value of $75,000 and a book value of $125,000. If Shunt has a current marginal tax rate of 34 percent, what is the net investment?
a) $1,030,000
b) $1,163,000
c) $1,033,000
d) $996,000