Deck 13: Capital Budgeting Decisions

Question 1

(Appendix 13A)Which of the following is associated with an increase in the discount rate?

A) It will increase the present value of future cash flows.
B) It will have no effect on net present value.
C) It will reduce the present value of future cash flows.
D) It is one method of compensating for reduced risk.

Answer 1

C

Question 2

Some investment projects require that a company expand its working capital to service the greater volume of business that will be generated.Under the net present value method,how should the investment of working capital be treated?

A) An initial cash outflow for which no discounting is necessary.
B) A future cash inflow for which discounting is necessary.
C) Both an initial cash outflow for which no discounting is necessary and a future cash inflow for which discounting is necessary.
D) Irrelevant to the net present value analysis.

Answer 2

C

Question 3

How are the following items used in the calculation of the net present value of a proposed project? (Ignore income tax considerations. )

A) Option A
B) Option B
C) Option C
D) Option D

Answer 3

C

Question 4

Which of the following statements about the evaluation of an investment having uneven cash flows using the payback method is correct?

A) It CANNOT be done.
B) It can be done only by matching cash inflows and investment outflows on a year-by-year basis.
C) It will produce essentially the same results as those obtained through the use of discounted cash flow techniques.
D) It requires the use of a sophisticated calculator or computer software.

Question 5

Why are the net present value and internal rate of return methods of capital budgeting superior to the payback method?

A) Because they are easier to implement.
B) Because they consider the time value of money.
C) Because they require less input.
D) Because they reflect the effects of depreciation and income taxes.

Question 6

The net present value method takes into account which of the following?

A) Option A
B) Option B
C) Option C
D) Option D

Question 7

(Appendix 13A)Which of the following would decrease the net present value of a project?

A) A decrease in the income tax rate.
B) A decrease in the initial investment.
C) An increase in the useful life of the project.
D) An increase in the discount rate.

Question 8

An investment project that requires a present investment of $210,000 will have cash inflows of R dollars each year for the next five years.The project will terminate in five years.Consider the following statements (ignore income tax considerations):
I)If R is less than $42,000,the payback period exceeds the life of the project.
II)If R is greater than $42,000,the payback period exceeds the life of the project.
III)If R equals $42,000,the payback period equals the life of the project.
Which statement(s)is(are)true?

A) I and II only.
B) I and III only.
C) II and III only.
D) I,II,and III.

Question 9

What does the payback method measure?

A) How quickly investment dollars may be recovered.
B) The cash flow from an investment.
C) The economic life of an investment.
D) The profitability of an investment.

Question 10

If the net present value of a project is zero,based on a discount rate of 16%,which of the following statements about the project's internal rate of return is correct?

A) It is equal to 16%.
B) It is less than 16%.
C) It is greater than 16%.
D) It cannot be determined from the information given.

Question 11

Which one of the following statements about the payback method of capital budgeting is correct?

A) The payback method does NOT consider the time value of money.
B) The payback method considers cash flows after the payback has been reached.
C) The payback method uses discounted cash flow techniques.
D) The payback method will lead to the same decision as other methods of capital budgeting.

Question 12

(Appendix 13B)Which of the following items is NOT included in the formula for calculating the present value of the capital cost allowance (CCA)tax shield?

A) Amount of working capital to be released at the end of a project.
B) The capital cost allowance rate.
C) The firm's cost of capital.
D) The firm's marginal income tax rate.

Question 13

Which of the following is a weakness of the internal rate of return method for screening investment projects?

A) It does NOT consider the time value of money.
B) It implicitly assumes that the company is able to reinvest cash flows from the project at the company's discount rate.
C) It implicitly assumes that the company is able to reinvest cash flows from the project at the internal rate of return.
D) It does NOT take into account all of the cash flows from a project.

Question 14

What is the capital budgeting method that divides a project's annual incremental net income by the initial investment?

A) The internal rate of return method.
B) The simple (or accounting)rate of return method.
C) The payback method.
D) The net present value methoD.

Question 15

(Appendix 13B)At what amount should the capital cost allowance (CCA)tax shield be included in the calculation of the net present value of an investment project?

A) The amount of the CCA with no adjustment for taxes.
B) The amount of the CCA multiplied by one minus the tax rate.
C) The amount of the CCA multiplied by the tax rate.
D) Zero,since the amount of CCA is not relevant to the calculation of net present value.

Question 16

How is depreciation handled by the following capital budgeting techniques? (Ignore income taxes in this problem. )

A) Option A
B) Option B
C) Option C
D) Option D

Question 17

The net present value method of capital budgeting assumes that cash flows are reinvested at what rate?

A) The internal rate of return on the project.
B) The rate of return on the company's debt.
C) The discount rate used in the analysis.
D) A zero rate of return.

Question 18

Which of the following capital budgeting techniques consider(s)cash flow over the entire life of the project?

A) Option A
B) Option B
C) Option C
D) Option D

Question 19

(Appendix 13A)Suppose an investment has cash inflows of R dollars at the end of each year for two years.What will be the present value of these cash inflows using a 12% discount rate?

A) Greater than under a 10% discount rate.
B) Less than under a 10% discount rate.
C) Equal to that under a 10% discount rate.
D) Sometimes greater than under a 10% discount rate and sometimes less;it depends on R.

Question 20

(Appendix 13B)By what amount does a capital cost allowance (CCA)deduction reduce income taxes?

A) One minus the tax rate multiplied by the amount of the CCA deduction.
B) The tax rate multiplied by the amount of the CCA deduction.
C) The amount of the CCA deduction.
D) The amount of the CCA deduction divided by one minus the tax rate.

Question 21

(Appendix 13A)In order to receive $12,000 at the end of three years and $10,000 at the end of five years,how much must be invested now if you can earn 14% rate of return? (Ignore income taxes in this problem. )(Round your PV factor to 5 decimal places and final answer to nearest whole dollar amount. )

A) $8,100.
B) $12,978.
C) $13,293.
D) $32,054.

Question 22

Given the following data:
Based on the data given,what would be the profitability index? (Ignore income taxes in this problem. )

A) 3.05%.
B) 35.8%.
C) 3.58%.
D) Cannot be determined from the information given.

Question 23

(Appendix 13A)Horn Corporation is considering investing in a four-year project.Cash inflows from the project are expected to be as follows: Year 1,$2,000;Year 2,$2,200;Year 3,$2,400;Year 4,$2,600.If using a discount rate of 8%,the project has a positive net present value of $500,what was the amount of the original investment? (Ignore income taxes in this problem. )(Do not round your intermediate calculations and round the final answer to the nearest whole dollar. )

A) $1,411.
B) $2,411.
C) $7,054.
D) $8,054.

Question 24

(Appendix 13A)Joe Flubup is the president of Flubup,Inc.He is considering buying a new machine that would cost $25,470.Joe has determined that the new machine promises an internal rate of return of 14%,but Joe has misplaced the paper which tells the annual cost savings promised by the new machine.He does remember that the machine has a projected life of 12 years.Based on these data,what are the annual cost savings to the nearest dollar? (Ignore income taxes in this problem. )

A) Impossible to determine from the data given.
B) $2,122.50.
C) $4,500.00.
D) $4,650.00.

Question 25

A planned factory expansion project has an estimated initial cost of $800,000.Using a discount rate of 20%,the present value of future cost savings from the expansion is $843,000.To yield exactly a 20% internal rate of return,the actual investment cost cannot exceed the $800,000 estimate by more than which of the following? (Ignore income taxes in this problem. )

A) $1,075.
B) $20,000.
C) $43,000.
D) $160,000.

Question 26

(Appendix 13A)Hilltop Company plans to invest $100,000 in a two-year project.The cash flow will be $40,000 for the first year and $80,000 in year 2.At a required rate of return of 12% what is the Net Present Value of the project? (Ignore income taxes in this problem. )(Do not round your intermediate calculations and round the final answer to the nearest whole dollar. )

A) $0.
B) $20,000.
C) $3,316.
D) $(510).

Question 27

(Appendix 13A)A piece of equipment has a cost of $20,000.The equipment will provide cost savings of $3,500 each year for ten years,after which time it will have a salvage value of $2,500.If the company's discount rate is 12%,what is the equipment's net present value? (Ignore income taxes in this problem. )(Do not round your intermediate calculations and round the final answer to the nearest whole dollar. )

A) ($224).
B) $581.
C) $546.
D) $17,500.

Question 28

(Appendix 13A)The following data pertain to an investment proposal:
The working capital would be released for use elsewhere when the project is completed.What is the net present value of the project,using a discount rate of 8%? (Ignore income taxes in this problem. )(Do not round your intermediate calculations and round the final answer to the nearest whole dollar. )

A) ($251).
B) $251.
C) $2,567.
D) $5,251.

Question 29

(Appendix 13A)The following data pertain to an investment in equipment:
At the completion of the project,the working capital will be released for use elsewhere.What is the net present value of the project,using a discount rate of 10%? (Ignore income taxes in this problem. )(Do not round your intermediate calculations and round the final answer to the nearest whole dollar. )

A) $603.
B) $126.
C) ($1,729).
D) ($517).

Question 30

(Appendix 13A)The following data pertain to an investment:
What is the net present value of the proposed investment? (Ignore income taxes in this problem. )(Do not round your intermediate calculations and round the final answer to the nearest whole dollar. )

A) ($3,430).
B) $0.
C) $620.
D) $3,355.

Question 31

(Appendix 13A)Parks Company is considering an investment proposal in which a working capital investment of $10,000 would be required.The investment would provide cash inflows of $2,000 per year for six years.The working capital would be released for use elsewhere when the project is completed.If the company's discount rate is 10%,what is the investment's net present value? (Ignore income taxes in this problem. )(Do not round your intermediate calculations and round the final answer to the nearest whole dollar. )

A) $1,289.
B) ($1,289).
C) $3,226.
D) $4,355.

Question 32

(Appendix 13A)Boston Company is contemplating the purchase of a new machine on which the following information has been gathered:
The company's discount rate is 16%,and the machine will be depreciated using the straight-line method.Given these data,what is the net present value of the machine to the nearest dollar,by not rounding intermediate calculations? (Ignore income taxes in this problem. )

A) ($26,100).
B) ($23,900).
C) $0.
D) $26,100.

Question 33

(Appendix 13A)The following information is available on a new piece of equipment:
What is approximately the life of the equipment? (Ignore income taxes in this problem. )

A) 4.3 years.
B) 6.0 years.
C) 8.0 years.
D) It is impossible to determine from the data given.

Question 34

(Appendix 13A)Kipling Company has invested in a project that has an eight-year life.It is expected that the annual cash inflow from the project will be $20,000.Assuming that the project has an internal rate of return of 12%,how much was the initial investment in the project? (Ignore income taxes in this problem. )(Round your PV factor to 5 decimal places and final answer to nearest whole dollar amount. )

A) $64,648.
B) $80,800.
C) $99,353.
D) $160,000.

Question 35

(Appendix 13A)The Whitton Company uses a discount rate of 16%.The company has an opportunity to buy a machine now for $18,000 that will yield cash inflows of $10,000 per year for each of the next three years.The machine would have no salvage value.What is the net present value of this machine,rounded to the nearest whole dollar,do not round your intermediate calculations? (Ignore income taxes in this problem. )

A) ($9,980).
B) $4,459.
C) $12,000.
D) $22,460.

Question 36

(Appendix 13A)Sue Falls is the president of Sports,Inc.She is considering buying a new machine that would cost $14,125.Sue has determined that the new machine promises an internal rate of return of 12%,but Sue has misplaced the paper that gives the annual cost savings promised by the new machine.She does remember that the machine has a projected life of ten years.Based on these data,what are the annual cost savings? (Ignore income taxes in this problem. )

A) It is impossible to determine from the data given.
B) $1,412.50.
C) $1,695.00.
D) $2,500.00.

Question 37

(Appendix 13A)The Baker Company purchased a piece of equipment with the following expected results:
What was the initial cost of the equipment? (Ignore income taxes in this problem. )(Round your PV factor to 5 decimal places and final answer to nearest whole dollar amount. )

A) $180,230.
B) $190,630.
C) $350,000.
D) Cannot be determined from the information given.

Question 38

(Appendix 13A)Benz Company is considering the purchase of a machine that costs $100,000 and has a useful life of 18 years.The company's required discount rate is 12%.If the machine's net present value is $5,850,what must be the annual cash inflows associated with the machine,rounded to the nearest whole dollar,do not round your intermediate calculations? (Ignore income taxes in this problem. )

A) $13,760.
B) $14,601.
C) $42,413.
D) They are impossible to determine from the data given.

Question 39

(Appendix 13A)White Company's required rate of return on capital budgeting projects is 12%.The company is considering an investment opportunity that would yield a cash flow of $10,000 in five years.What is the most that the company should be willing to invest in this project? (Ignore income taxes in this problem. )(Round your PV factor to 5 decimal places and final answer to nearest whole dollar amount. )

A) $2,774.
B) $5,674.
C) $17,637.
D) $36,050.

Question 40

(Appendix 13A)The following data pertain to an investment proposal:
What is the net present value of the proposed investment? (Ignore income taxes in this problem. )(Do not round your intermediate calculations and round the final answer to the nearest whole dollar. )

A) $1,720.
B) $2,023.
C) $2,154.
D) $6,064.

Question 41

(Appendix 13A and 13B)A company anticipates a taxable cash receipt of $50,000 in year 3 of a project.The company's tax rate is 30%,and its discount rate is 14%.What is the approximate present value of this future cash flow? Do not round your intermediate calculations and round the final answer to the nearest whole dollar. )

A) $10,125.
B) $15,000.
C) $23,624.
D) $35,000.

Question 42

(Appendix 13A)The following data pertain to an investment proposal:
The internal rate of return on this investment proposal is closest to which of the following? (Ignore income taxes in this problem. )

A) 6.7%.
B) 7.3%.
C) 8.7%.
D) 9.3%.

Question 43

A company with $800,000 in operating assets is considering the purchase of a machine that costs $75,000 and which is expected to reduce operating costs by $20,000 each year.The payback period for this machine in years is closest to which of the following? (Ignore income taxes in this problem. )

A) 0.27 years.
B) 3.75 years.
C) 10.70 years.
D) 40.00 years.

Question 44

(Appendix 13A)The following data are available on a proposed investment project:
Which of the following statements best describes the internal rate of return on the proposed investment project? (Ignore income taxes in this problem. )

A) It is between 11% and 12%.
B) It is between 12% and 13%.
C) It is between 13% and 14%.
D) It is less than the required rate of return.

Question 45

Jarvey Company is studying a project that would have a ten-year life and would require a $450,000 investment in equipment that has no salvage value.The project would provide net income each year as follows for the life of the project:
The company's required rate of return is 12%.What is the payback period for this project? (Ignore income taxes in this problem. )

A) 2.00 years.
B) 3.00 years.
C) 4.28 years.
D) 9.00 years.

Question 46

(Appendix 13A)Overland Company has gathered the following data on a proposed investment project:
The internal rate of return on this investment is closest to which of the following? (Ignore income taxes in this problem. )

A) 10%.
B) Less than 10%.
C) Between 10% and 20%.
D) Greater than 20%.

Question 47

(Appendix 13A and 13B)A company anticipates a taxable cash receipt of $20,000 in year 3 of a project.The company's tax rate is 30%,and its discount rate is 8%.What is the approximate present value of this future cash flow? (Do not round your intermediate calculations and round the final answer to the nearest whole dollar. )

A) $4,763.
B) $6,000.
C) $11,114.
D) $14,000.

Question 48

The Higgins Company has just purchased a piece of equipment at a cost of $120,000.This equipment will reduce operating costs by $40,000 each year for the next eight years.This equipment replaces old equipment that was sold for $8,000 cash.What is the new equipment's payback period? (Ignore income taxes in this problem. )

A) 2.8 years.
B) 3.0 years.
C) 8.0 years.
D) 10.0 years.

Question 49

(Appendix 13A)Stratford Company purchased a machine with an estimated useful life of seven years.The machine will generate cash inflows of $90,000 each year over the next seven years.If the machine has no salvage value at the end of seven years,and assuming the company's discount rate is 10%,what is the purchase price of the machine if the net present value of the investment is $170,000? (Ignore income taxes in this problem. )(Do not round your intermediate calculations and round the final answer to the nearest whole dollar. )

A) $170,000.
B) $221,950.
C) $268,158.
D) $608,157.

Question 50

(Appendix 13A and 13B)A company anticipates a tax-deductible cash expense of $10,000 in year 2 of a project.The company's tax rate is 30%,and its discount rate is 8%.What is the approximate present value of this future cash outflow? Do not round your intermediate calculations and round the final answer to the nearest whole dollar. )

A) $7,000.
B) $6001.
C) $3,000.
D) $2,572.

Question 51

Buy-Rite Pharmacy has purchased a small auto for delivering prescriptions.The auto was purchased for $9,000 and will have a six-year useful life and a $3,000 salvage value.Delivering prescriptions (which the pharmacy has never done before)should increase gross revenues by at least $5,000 per year.The cost of these prescriptions to the pharmacy will be about $2,000 per year.The pharmacy depreciates all assets using the straight-line method.What is the payback period for the auto? (Ignore income taxes in this problem. )

A) 1.2 years.
B) 1.8 years.
C) 2.0 years.
D) 3.0 years.

Question 52

(Appendix 13A)Arthur operates a part-time auto repair service.He estimates that a new diagnostic computer system will result in increased cash inflows of $2,100 in Year 1,$3,200 in Year 2,and $4,000 in Year 3.If Arthur's discount rate is 10%,what would be the maximum amount he should be willing to pay for the new computer system? (Ignore income taxes in this problem. )(Do not round your intermediate calculations and round the final answer to the nearest whole dollar. )

A) $6,652.
B) $6,984.
C) $7,559.
D) $7,747.

Question 53

Denny Corporation is considering replacing a technologically obsolete machine with a new state-of-the-art numerically controlled machine.The new machine would cost $450,000 and would have a ten-year useful life.Unfortunately,the new machine would have no salvage value.The new machine would cost $20,000 per year to operate and maintain,but would save $100,000 per year in labour and other costs.The old machine can be sold now for scrap for $50,000.The simple rate of return on the new machine is closest to which of the following? (Ignore income taxes in this problem. )

A) 7.78%.
B) 8.75%.
C) 20.00%.
D) 22.22%.

Question 54

(Appendix 13A)The following information concerns a proposed investment:
What is the internal rate of return? (Ignore income taxes in this problem. )

A) 5%.
B) 10%.
C) 12%.
D) 14%.

Question 55

(Appendix 13A and 13B)A company anticipates a taxable cash receipt of $50,000 in year 4 of a project.The company's tax rate is 30%,and its discount rate is 12%.What is the approximate present value of this future cash flow? (Do not round your intermediate calculations and round the final answer to the nearest whole dollar. )

A) $9,533.
B) $15,000.
C) $22,243.
D) $35,000.

Question 56

(Appendix 13A)The following data pertain to an investment proposal:
What would be the internal rate of return? (Ignore income taxes in this problem. )

A) 5.426%.
B) 13.0%.
C) 54.26%.
D) 542.6%.

Question 57

The Keego Company is planning a $200,000 equipment investment that has an estimated five-year life with no estimated salvage value.The company has projected the following annual cash flows for the investment.
Assuming that the cash inflows occur evenly over the year,what is the payback period for the investment? (Ignore income taxes in this problem. )

A) 0.75 years.
B) 1.67 years.
C) 2.50 years.
D) 4.91 years.

Question 58

Information on four investment proposals is given below:
What are preference rankings of the four proposals according to the profitability index?

A) 3,4,1,2.
B) 1,2,3,4.
C) 1,3,2,4.
D) 2,1,4,3.

Question 59

The Jason Company is considering the purchase of a machine that will increase revenues by $32,000 each year.Cash outflows for operating this machine will be $6,000 each year.The cost of the machine is $65,000.It is expected to have a useful life of five years with no salvage value.For this machine,what is the simple rate of return? (Ignore income taxes in this problem. )

A) 9.2%.
B) 20.0%.
C) 40.0%.
D) 49.2%.

Question 60

(Appendix 13A)Sam Weller is thinking of investing $70,000 to start a bookstore.Sam plans to earn $15,000 cash from the business at the end of each year for the next five years.At the end of the fifth year,Sam plans to sell the business for $110,000 cash.At a 12% discount rate,what is the net present value of the investment? (Ignore income taxes in this problem. )(Do not round your intermediate calculations and round the final answer to the nearest whole dollar. )

A) $46,489.
B) $54,075.
C) $62,370.
D) $70,000.

Question 61

(Appendix 13B)Last year,a firm had taxable cash receipts of $800,000,and the tax rate was 30%.What was the after-tax net cash inflow from these receipts?

A) $240,000.
B) $560,000.
C) $640,000.
D) $800,000.

Question 62

(Appendix 13B)Kane Company is in the process of purchasing a new machine for its production line.It is near the end of the year,and the machine is being offered at a special discount if purchased before the end of the year.Kane has determined that the capital cost allowance (CCA)deduction on the new machine for the year of purchase would be $13,000.The tax rate is 30%.If Kane purchases the machine and reports a positive net income for the year,what would be the tax savings from the CCA tax shield related to this machine for the year of purchase?

A) $0.
B) $3,900.
C) $9,100.
D) $13,000.

Question 63

(Appendix 13B)Suppose a machine costs $20,000 now,has an expected life of eight years,and will require a $7,000 overhaul at the end of the third year.If the tax rate is 40%,what would be the after-tax cost of this overhaul?

A) $2,800.
B) $4,200.
C) $8,000.
D) $12,000.

Question 64

(Appendix 13B)At the Bartholomew Company last year,all sales were for cash and all expenses were paid in cash.The tax rate was 30%.If the after-tax net cash inflow from these operations last year was $10,500,and if the total before-tax and tax-deductible cash expenses were $35,000,what must have been the total before-tax cash sales?

A) $45,000.
B) $50,000.
C) $60,000.
D) $65,000.

Question 65

(Appendix 13B)A piece of equipment is in Class 7 with a maximum CCA rate of 15%.The income tax rate is 40%.The tax savings from the CCA tax shield on this equipment for the first year was $1,500.What must have been the original capital cost of the equipment?

A) $3,750.
B) $25,000.
C) $33,333.
D) $50,000.

Question 66

(Appendix 13A and 13B)A company needs an increase in working capital of $70,000 in a project that will last three years.The company's tax rate is 30%,and its discount rate is 8%.What is the approximate present value of the working capital to be released at the end of the project? (Do not round your intermediate calculations and round the final answer to the nearest whole dollar. )

A) $21,000.
B) $38,898.
C) $49,000.
D) $55,568.

Question 67

(Appendix 13B)Superstrut is considering replacing an old press that cost $80,000 six years ago with a new one that would cost $245,000.The old press has a net book value of $15,000 and could be sold for $5,000.The increased production of the new press would require an investment in additional working capital of $6,000.The company's tax rate is 40%.What would be Superstrut's net investment now in the project?

A) $240,000.
B) $245,000.
C) $246,000.
D) $251,000.

Question 68

(Appendix 13B)Consider a machine that costs $115,000 now and has a useful life of seven years.This machine will require a major overhaul at the end of the fourth year that will cost X dollars.If the tax rate is 40%,and if the after-tax cash outflow for this overhaul is $3,600,what is the amount of X in dollars?

A) $1,440.
B) $2,160.
C) $6,000.
D) $9,000.

Question 69

(Appendix 13A and 13B)A company needs an increase in working capital of $20,000 in a project that will last four years.The company's tax rate is 30%,and its discount rate is 10%.What is the approximate present value of the working capital to be released at the end of the project? (Do not round your intermediate calculations and round the final answer to the nearest whole dollar. )

A) $6,000.
B) $9,562.
C) $13,660.
D) $14,000.

Question 70

(Appendix 13A and 13B)A company anticipates a capital cost allowance (CCA)deduction of $70,000 in year 2 of a project.The company's tax rate is 30%,and its discount rate is 14%.What is the approximate present value of the CCA tax shield resulting from this deduction? (Do not round your intermediate calculations and round the final answer to the nearest whole dollar. )

A) $16,159.
B) $21,000.
C) $37,704.
D) $49,000.

Question 71

(Appendix 13A and 13B)A company anticipates a capital cost allowance (CCA)deduction of $30,000 in year 3 of a project.The company's tax rate is 30%,and its discount rate is 12%.What is the approximate present value of the CCA tax shield resulting from this deduction? (Do not round your intermediate calculations and round the final answer to the nearest whole dollar. )

A) $6,406.
B) $9,000.
C) $14,947.
D) $21,000.

Question 72

(Appendix 13B)Last year,the sales at Seidelman Company were $700,000 and were all cash sales.The company's tax-deductible expenses were $450,000 and were all cash expenses.The tax rate was 35%.What was the after-tax net cash inflow at Seidelman last year?

A) $87,500.
B) $162,500.
C) $250,000.
D) $700,000.

Question 73

(Appendix 13A and 13B)A company anticipates a tax-deductible cash expense of $60,000 in year 2 of a project.The company's tax rate is 30%,and its discount rate is 14%.What is the approximate present value of this future cash outflow? Do not round your intermediate calculations and round the final answer to the nearest whole dollar. )

A) $42,000.
B) $32,318.
C) $18,000.
D) $38,473.

Question 74

(Appendix 13A and 13B)A company anticipates a tax-deductible cash expense of $40,000 in year 2 of a project.The company's tax rate is 30%,and its discount rate is 10%.What is the approximate present value of this future cash outflow? Do not round your intermediate calculations and round the final answer to the nearest whole dollar. )

A) $28,000.
B) $23,140.
C) $12,000.
D) $9,917.

Question 75

(Appendix 13A and 13B)A company needs an increase in working capital of $50,000 in a project that will last four years.The company's tax rate is 30%,and its discount rate is 8%.What is the approximate present value of the working capital to be released at the end of the project (Do not round your intermediate calculations and round the final answer to the nearest whole dollar. )?

A) $15,000.
B) $25,726.
C) $35,000.
D) $36,751.

Question 76

(Appendix 13B)Suppose a machine that costs $80,000 has a useful life of ten years.Also suppose that capital cost allowance (CCA)deduction on the machine is $8,000 in year 4.The tax rate is 40%.What would be the tax savings from the CCA tax shield in year 4?

A) $4,800 outflow.
B) $3,200 outflow.
C) $3,200 inflow.
D) $4,800 inflow.

Question 77

(Appendix 13A and 13B)A company anticipates a capital cost allowance (CCA)deduction of $20,000 in year 2 of a project.The company's tax rate is 30%,and its discount rate is 12%.What is the approximate present value of the CCA tax shield resulting from this deduction? (Do not round your intermediate calculations and round the final answer to the nearest whole dollar. )

A) $4,783.
B) $6,000.
C) $11,161.
D) $14,000.

Question 78

(Appendix 13B)Last year,the sales at Jersey Company were $200,000 and were all cash sales.The tax-deductible expenses at Jersey were $125,000 and were all cash expenses.The tax rate was 30%.What was the after-tax net cash inflow at Jersey last year from these operations?

A) $22,500.
B) $37,500.
C) $52,500.
D) $60,000.

Question 79

(Appendix 13B)The capital cost allowance (CCA)tax shield of a Class 7 asset with a maximum 15% CCA rate was $12,000 for Year 2.The income tax rate was 40%.What was the total CCA deduction for the asset for Year 2?

A) $12,000.
B) $20,000.
C) $30,000.
D) $80,000.

Question 80

(Appendix 13B)A company had tax-deductible cash expenses of $650,000 last year,and the tax rate was 30%.What was the after-tax net cash outflow for these expenses?

A) $195,000.
B) $390,000.
C) $455,000.
D) $650,000.