The cash flows of a project should A be computed on a pre tax basis B include

The cash flows of a project should a be computed on a

This preview shows page 10 - 13 out of 74 pages.

31. The cash flows of a project should: A. be computed on a pre-tax basis.B. include all sunk costs and opportunity costs.C. include all incremental costs, including opportunity costs.D. be applied to the year when the related expense or income is recognized by GAAP.E. include all financing costs related to new debt acquired to finance the project. 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 - TaxesII. EBIT + Depreciation + TaxesIII. Net Income + DepreciationIV. (Sales - Costs) ×(Taxes + Depreciation) ×(1 - Taxes) 33. The bottom-up approach to computing the operating cash flow applies only when: 34. The top-down approach to computing the operating cash flow: 6-10
Image of page 10
Chapter 06 - Making Capital Investment Decisions 35. An increase in which one of the following will increase the operating cash flow? A. employee salariesB. office rentC. building maintenanceD. equipment depreciationE. equipment rental 36. Tax shield refers to a reduction in taxes created by: 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. 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: 6-11
Image of page 11
Chapter 06 - Making Capital Investment Decisions
Image of page 12
Image of page 13

You've reached the end of your free preview.

Want to read all 74 pages?

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture