Question 1

Ashley Manufacturing is expanding its product line. As a consequence, it will have to hire thirty-five new production workers at an annual cost of $1,050,000, seven new supervisors at a cost of $350,000, and one additional individual in the personnel department at an annual cost of $35,000. The incremental impact on projected cash flows is:

Accepted Answer

A)  $0.
B)  $385,000.
C)  $1,400,000.
D)  $1,435,000.E) B) and D)
F) A) and B)

Question 2

Basic overheads are usually considered fixed and left out of project analysis.

Accepted Answer

A) True 
 B)False

Question 3

It's important to keep the distinction between earnings and cash flows in mind when doing project projections. Managers invariably want to know the net income impact of projects as well as the results of the capital budgeting analysis.

Accepted Answer

A) True 
 B)False

Question 4

The management of Jasper Equipment Company is planning to purchase a new milling machine that will cost $160,000 installed. The old milling machine has been fully depreciated but can be sold for $15,000. The new machine will be depreciated on a straight-line basis over its 10-year economic life to an estimated salvage value of $10,000. If this milling machine will save Jasper $20,000 a year in production expenses, what are the annual net cash flows associated with the purchase of this machine? Assume a marginal tax rate of 40 percent.

Accepted Answer

A)  $15,000
B)  $18,000
C)  $27,000
D)  None of the aboveE) A) and B)
F) A) and D)

Question 5

In estimating the cost of a new project, the firm should exclude:

Accepted Answer

A)  opportunity costs.
B)  fixed costs.
C)  variable costs.
D)  alternative costs.
E)  b and cF) A) and B)
G) B) and E)

Exam 11: Cash Flow Estimation

Correct Answer
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Correct Answer
verified

It's important to keep the distinction between earnings and cash flows in mind when doing project projections. Managers invariably want to know the net income impact of projects as well as the results of the capital budgeting analysis.

Correct Answer
verified

In estimating the cost of a new project, the firm should exclude:

Correct Answer
verified

Basic overheads are usually considered fixed and left out of project analysis.

Correct Answer
verified

Exam 11: Cash Flow Estimation

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

It's important to keep the distinction between earnings and cash flows in mind when doing project projections. Managers invariably want to know the net income impact of projects as well as the results of the capital budgeting analysis.

Correct AnswerverifiedShow Answer

In estimating the cost of a new project, the firm should exclude:

Correct AnswerverifiedShow Answer

Basic overheads are usually considered fixed and left out of project analysis.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified