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82. What is the value of the depreciation tax shield in year 2 of the project? A. $134,000 B. $240,000 C. $334,000 D.$400,000 E. $1,000,000 Depreciation tax shield = $5,000,000 5 .40 = $400,000 Difficulty level: Medium Topic: DEPRECIATION TAX SHIELD Type: PROBLEMS 83. What is the amount of the after-tax salvage value of the equipment? Difficulty level: Medium Topic: AFTER-TAX SALVAGE VALUE Type: PROBLEMS 84. What is the recovery amount attributable to net working capital at the end of the project? Difficulty level: Medium Topic: CHANGE IN NET WORKING CAPITAL Type: PROBLEMS
Chapter 06 - Making Capital Investment Decisions 6-44 Essay Questions85. This chapter introduced three new methods for calculating project operating cash flow (OCF). Under what circumstances is each method appropriate? Topic: OPERATING CASH FLOW Type: ESSAYS 86. When is it appropriate to use the equivalent annual cost (EAC) methodology, and how do you make a decision using it? Topic: EQUIVALENT ANNUAL COST Type: ESSAYS 87. Should financing costs be included as an incremental cash flow in capital budgeting analysis? Topic: FINANCING COSTS Type: ESSAYS
Chapter 06 - Making Capital Investment Decisions 6-45 88. Explain the half year convention used in MACRS depreciation.