Chapter 11 MC - CHAPTER ELEVEN Multiple Choice Questions...

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon
CHAPTER ELEVEN Multiple Choice Questions 11-1. If a new machine requires an increase in current assets from $50,000 to $60,000 and current liabilities from $30,000 to $50,000, the dollar change in net working capital is: a. negative b. positive c. zero d. undefined 11-2. What is the relevant cash flow in year three for the following projected cash flows of a new and an old machine? Year New Old 0 0 0 1 $100,000 $75,000 2 123,672 70,000 3 125,000 70,000 a. $ 25,000 b. $ 50,000 c. $125,000 d. $ 55,000 11-3. What is the relevant initial cash outflow of the following project for capital budgeting analysis purposes? Equipment cost $100,000 Installation 20,000 Delivery 3,000 Consultant fees for regulation impact study 15,000 Change in operating expenses 5,000/year a. $120,000 b. $128,000 c. $138,000 d. $123,000 128
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
11-4. Which of the following items would not represent an incremental cash flow? a. shut-down cash flow b. existing overhead expense c. operating cash flow d. initial investment cash flow 11-5. With respect to changes in net working capital, which of the following could likely happen as sales increase? a. decrease in payables b. increases in cash and gross fixed equipment c. increase in long-term debt d. increase in accounts receivables 11-6. What is the relevant initial cash outflow for the following project? Equipment cost $50,000 Installation $ 5,000 Cash increase needed $ 2,000 Inventory increase needed $ 3,000 Accounts payable increase $ 2,000 a. $58,000 b. $62,000 c. $55,000 d. $60,000 11-7. Depreciation associated with a project will: a. cause incremental operating cash flows to decrease b. have no effect on incremental cash flows c. cause incremental operating cash flows to increase d. only affect the fixed asset account as depreciation is a sunk cost 11-8. When the used asset is eventually sold for less than its depreciated book value: a. then it is taxed as ordinary income gain b. there are no tax effects c. there is a capital gain tax d. The firm’s tax liability is reduced by the amount of the loss times the ordinary income tax rate 129
Background image of page 2
11-9. You have purchased equipment costing $100,000 and will depreciate it according to
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 4
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 01/21/2011 for the course ACC 452 taught by Professor Mr.cula during the Spring '10 term at Abraham Baldwin Agricultural College.

Page1 / 8

Chapter 11 MC - CHAPTER ELEVEN Multiple Choice Questions...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online