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What Is the Capital Budgeting Method That Divides a Project's

Question 16
Multiple Choice

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.

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Q 17
(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.
Q 18
(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.
Q 19
(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.
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