We can use the ________ to estimate a project’s operating cash flows each period. A) modified income statement format B) income statement format C) balance sheet format D) annual report format ANSWER Answer: A
Date: September 19th, 2020
Northwest Co. purchases an asset for $6,000. This asset qualifies as a seven-year recovery asset under MACRS. Benson has a tax rate of 30%. The seven-year expense percentages for years 1, 2, 3, 4, 5, and 6 are 14.29%, 24.49%, 17.49%, 12.49%, 8.93%, and 8.93%, respectively. If the asset is sold at the end of […]
Date: September 19th, 2020
Once the operations for a new project are up and running, we need to estimate the cash flow from ________. A) sunk costs B) flotation costs C) depreciation D) operations ANSWER Answer: D
Date: September 19th, 2020
We assume no ________ costs for a project if a competitor is also introducing a competing product. A) sunk B) buyback C) erosion D) corrosion ANSWER Answer: C
Date: September 19th, 2020
In general, the greater a firm’s current assets relative to its short-term obligations, the better able it will be to pay its bills as they come due. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
Fully depreciated assets have a positive book value, and so any proceeds from sale at disposal are taxable gains. Indicate whether the statement is true or false. ANSWER Answer: FALSE Explanation: Fully depreciated assets have A BOOK VALUE OF ZERO, and so any proceeds from sale at disposal are taxable gains.
Date: September 19th, 2020
The asymmetric information explanation of capital structure suggests that firms will issue new debt only when the managers believe the firm’s stock is overvalued; as a result, issuing new debt is considered a negative signal that will result in a decline in share price. Indicate whether the statement is true or false ANSWER […]
Date: September 19th, 2020
If the selling price of an asset at disposal is less than its book value, then the after-tax cash flow is the selling price minus the tax on the gain. Indicate whether the statement is true or false. ANSWER Answer: FALSE Explanation: If the selling price of an asset at disposal is GREATER […]
Date: September 19th, 2020
Eastern Inc. purchases a machine for $70,000. This machine qualifies as a five-year recovery asset under MACRS with the fixed depreciation percentages as follows: year 1 = 20.00%; year 2 = 32.00%; year 3 = 19.20%; year 4 = 11.52%. The firm has a tax rate of 40%. If the machine is sold at the […]
Date: September 19th, 2020
Southwest Co. purchases an asset for $60,000. This asset qualifies as a seven-year recovery asset under MACRS. Winston has a tax rate of 30%. The seven-year fixed depreciation percentages for years 1, 2, 3, 4, 5, and 6 are 14.29%, 24.49%, 17.49%, 12.49%, 8.93%, and 8.93%, respectively. If the asset is sold at the end […]
Date: September 19th, 2020
