1. Which of the following is true of replacement projects?
a. They generate costs that are planned and directly related to the sales forecast.
b. They imply increases in costs and revenues.
c. They need not be adjusted for depreciation and taxes.
d. Their benefits usually come from expected savings.
2. Cash flows that are foregone if the project is undertaken should be included in cash flow estimation. Such a foregone resource is normally referred to as:
a. sunk costs.
b. opportunity costs.
c. resource relinquishment.
d. None of these choices are correct.
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. $130,000
b. $170,000
c. $150,000
d. $120,000
e. $90,000