1. Which of the following statement completions is incorrect? For a profitable firm, when MACRS accelerated depreciation is compared to straight-line depreciation, MACRS accelerated allowances produce
a. Higher depreciation charges in the early years of an asset's life.
b. Larger cash flows in the earlier years of an asset's life.
c. Larger total undiscounted profits from the project over the project's life.
d. Smaller accounting profits in the early years, assuming the company uses the same depreciation method for tax and book purposes.
e. None of the above. (All of the above are correct.)
2. The Adept Co. is analyzing a proposed project. The company expects to sell 3,300 units, give or take 4 percent. The expected variable cost per unit is $11 and the expected fixed costs are $12,500. Cost estimates are considered accurate within a plus or minus 2 percent range. The depreciation expense is $2,000. The sale price is estimated at $19 a unit, give or take 2 percent. What is the contribution margin under the expected case scenario?
$2.67
$3.00
$7.92
$8.00
$8.72