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
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
Chapter 06 - Making Capital Investment Decisions
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