Question : Objective 21.5 1) Which of the following a component of net-initial-investment : 1211985

Objective 21.5

1) Which of the following is a component of net-initial-investment cash flows?

A) original cost of an old equipment

B) cash outflow to purchase a new equipment

C) depreciation cost

D) after-tax cash flow from operations

2) The Fortive Corporation disposes a capital asset with an original cost of $180,000 and accumulated depreciation of $111,000 for $56,000. Alpha betas tax rate is 40%. Calculate the after-tax cash inflow from the disposal of the capital asset.

A) $5,200

B) ($5,200)

C) $61,200

D) $69,000

3) The Golden Shades Corporation disposes a capital asset with an original cost of $280,000 and accumulated depreciation of $160,000 for a salvage price of $50,000. Silver Shades’s tax rate is 40%. Calculate the after-tax cash inflow from the disposal of the capital asset.

A) $28,000

B) $70,000

C) $50,000

D) $78,000

4) The Ambitz Corporation has an annual cash inflow from operations from its investment in a capital asset of $35,000 each year for four years. The corporation’s income tax rate is 40%. Calculate the total after-tax cash inflow from operations  for four years.

A) $ 140,000

B) $ 150,000

C) $ 84,000

D) $35,000

5) The Venoid Corporation has an annual cash inflow from operations from its investment in a capital asset of $16,000 each year for six years. The corporation’s income tax rate is 30%. Calculate the total after-tax cash inflow from operations for six years.

A) $96,000

B) $67,200

C) $28,800

D) $16,000

6) A capital budgeting tool that management can use to summarize the difference in the future net cash inflows from an intangible asset at two different points in time is referred to as:

A) the accrual accounting rate-of-return method

B) the net present value method

C) sensitivity analysis

D) the payback method

7) The focus in capital budgeting should be on ________.

A) favorable and unfavorable variance

B) expenses under accrual accounting

C) expected future cash flows that differ between alternatives

D) allocation of overheads

8) An example of a sunk cost in a capital budgeting decision for new equipment is ________.

A) the initial investment in working capital

B) the original price of an old equipment

C) the necessary transportation costs on a new equipment

D) the initial investment in a new equipment

9) Depreciation is usually NOT considered an operating cash flow in capital budgeting because ________.

A) depreciation is usually a constant amount each year over the life of the capital investment

B) deducting depreciation from operating cash flows would be counting the lump-sum amount twice

C) depreciation usually does not result in an increase in working capital

D) depreciation usually has no effect on the disposal price of the machine

10) The relevant terminal disposal price of a machine equals the ________.

A) difference between the salvage value of the old machine and the ultimate salvage value of the new machine

B) total of the salvage values of the old machine and the new machine

C) salvage value of the old machine

D) salvage value of the new machine