Answer true diff3 terms netpresentvalue npvmethod

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Unformatted text preview: es of cash flow for an investment project are: (1) net initial investment, (2) after tax cash flow from operations, and (3) after tax cash flow from terminal disposal of an asset. Diff: 2 Terms: capital budgeting Objective: 7 AACSB: Reflective thinking 26) Depreciati on tax deductions result in tax savings that partially offset the cost of acquiring the capital asset. Answer: TRUE Diff: 2 Terms: capital budgeting Objective: 7 AACSB: Analytical skills 27) The use of an accelerated method of depreciation for tax purposes would usually increase the present value of the investment. Answer: TRUE Diff: 3 Terms: net present value (NPV) method Objective: 7 AACSB: Analytical skills 28) An example of an intangible asset would be a corporation's customer base. Answer: TRUE Diff: 2 Terms: net present value (NPV) method Objective: 7 AACSB: Reflective thinking 29) Relevant cash flows are expected future cash flows that differ among the alternative uses of investment funds. Answer: TRUE Diff: 2 Terms: capital budgeting Objective: 7 AACSB: Analytical skills 30) Deducting on from operating cash flows would result in counting the initial investment twice in a discounted cash flow analysis. depreciati Answer: TRUE Diff: 2 Terms: discounted cash flow (DCF) methods Objective: 7 AACSB: Analytical skills 31) In determining whether to keep a machine or replace it, the original cost of the machine is always a relevant factor. Answer: FALSE Explanation: In determining whether to keep a machine or replace it, the original cost of the machine is a sunk cost and is not a relevant factor. Diff: 2 Terms: capital budgeting Objective: 7 AACSB: Analytical skills 32) In the net value (NPV) method, after-tax cash flows should be used instead of pre-tax cash flows when taxes are a consideration. present Answer: TRUE Diff: 2 Terms: capital budgeting Objective: 7 AACSB: Reflective thinking 33) In g the net initial investment cash flows, any increase in working capital required for the project should be included. calculatin Answer: TRUE Diff: 2 Terms: capital budgeting Objective: 7 AACSB: Analytical sk...
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