Are opportunity costs relevant or irrelevant to the capital budgeting decision? What about sunk cost? Your factory
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- Are opportunity costs relevant or irrelevant to the capital budgeting decision? What about sunk cost?
- Your factory overhead will increase from $100,000 to $140,000 if you take on a new project. How much should be included in the operating cash flows for this new project? And would this be an outflow or an inflow?
- I bought my car for $28,000 five years ago, it is now worth $16,000 (net of selling expenses). I want to use my car in a new taxi business that I am starting. What is the correct opportunity cost that should be used in calculating the NPV of my taxi service?
- Per the book, you wish to maximize your depreciation for a piece of equipment placed into service on July 1st of 2017. Using the MACRS tables given in the book, what depreciation rate would you use for 2019 and 2020 in depreciation of this equipment?
- Per IRS rules, over how many years are you allowed to depreciate commercial buildings? And how many for residential buildings? And how many for land (not land improvements)?
- Your inventory balance was $80,000 on 12/31/2016 and was $100,000 on 12/31/2017. Was this change in the inventory balance a source or use of cash? Pick one.
- Your accrued expense balance was $100,000 on 12/31/2016 and was $60,000 on 12/31/2017. Was this decrease in accrued expenses a source or use of cash? Pick one.
- You have $60,000 in cash, $400,000 in accounts receivable, $500,000 in inventory, $450,000 in accounts payable, $250,000 in accrued expenses on 12/31/2017. What was your networking capital balance on this date?
- You operated your business this year and calculated a net income after tax of $200,000. When calculating this net income, you subtracted $85,000 in depreciation to get the $200,000 net income amount. If this was your only non-cash operating expense and there were no changes in your working capital balances, what are your operating cash flows for the year?
- In the typical business, are the acquisitions stage cashflows typically positive (inflows) or negative (outflows)? In addition, what about the cash flows from operations for businesses in the maturity stage of their life cycles? Inflows or outflows?
Related Book For
Finance Applications and Theory
ISBN: 978-0077861681
3rd edition
Authors: Marcia Cornett, Troy Adair
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