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32. Which of the following are correct methods for computing the operating cash flow of a project assuming that the interest expense is equal to zero? I. EBIT + Depreciation - Taxes II. EBIT + Depreciation + Taxes III. Net Income + Depreciation IV. (Sales - Costs) (Taxes + Depreciation) (1 - Taxes) A.I and III only B. II and IV only C. II and III only D. I, III, and IV only E. II, III, and IV only Difficulty level: Medium Topic: PROJECT OCF Type: CONCEPTS 33. The bottom-up approach to computing the operating cash flow applies only when: Difficulty level: Medium Topic: BOTTOM-UP OCF Type: CONCEPTS
Chapter 06 - Making Capital Investment Decisions 6-14 34. The top-down approach to computing the operating cash flow: Difficulty level: Medium Topic: TOP-DOWN OCF Type: CONCEPTS 35. An increase in which one of the following will increase the operating cash flow? Difficulty level: Easy Topic: TAX SHIELD Type: CONCEPTS 36. Tax shield refers to a reduction in taxes created by: A. a reduction in sales. B. an increase in interest expense. C.noncash expenses. D. a project's incremental expenses. E. opportunity costs. Difficulty level: Easy Topic: TAX SHIELD Type: CONCEPTS
Chapter 06 - Making Capital Investment Decisions 6-15 37. A project which is designed to improve the manufacturing efficiency of a firm but will generate no additional sales is referred to as a(n) _____ project. Difficulty level: Easy Topic: COST-CUTTING Type: CONCEPTS 38. Toni's Tools is comparing machines to determine which one to purchase. The machines sell for differing prices, have differing operating costs, differing machine lives, and will be replaced when worn out. These machines should be compared using: Difficulty level: Medium Topic: EQUIVALENT ANNUAL COST Type: CONCEPTS