1. Working capital needed for a new project is treated as a cash outflow now and as a cash inflow when the project ends. a. True b. False 2. Which of the following is not an example of a cash inflow for a proposed machine purchase? a. Salvage value at the end of its useful life b. Savings in direct labor wages and inventory carrying costs c. Annual operating costs of the machine d. Increase in contribution margin from greater production and sales 3. Freestone Company is considering buying Machine B to replace Machine A. Both machines have the same remaining useful life and will perform the same tasks. However, it is expected that B will require less direct labor usage to operate the machine than does A. B will also increase production, generating additional contribution margin from product sales for the company. For this decision problem, which of the following factors is (are) relevant? I. Original cost of Machine A II. Contribution Margin from sales generated by each machine III. Cost to purchase Machine B IV. Cost of direct labor to operate each machine a. Only I, III, and IV b. Only II, III, and IV c. Onlyland III d. I, II, III, and IV are all relevant 4. Joe and his sister Patty plan to invest $12,000 to start a used book business at the beginning of next year. They expect to receive cash inflows of $3,000 each year for four years. At the end of the fourth year, they plan to sell the business for $15,000 cash. Using an 8% minimum required rate of return, what is the net present value of Joe and Patty's business investment? (Ignore taxes) a. $8,961 b. $7,236 c. $6,441 d. $7,082 Kern Co. is planning to invest in a two-year project that is expected to yield cash flows from operations of $75,000 in the first year and $100,000 in the second year. Kern requires a return of 12 percent on all investment projects. The maximum that Kern should invest in this project is: (Ignore taxes) a. $146,675 b. $175,000 c. $156,228 d. $170,820 L acant