1)Why do we only include incremental cash flows when evaluating a project using the NPV project evaluation method?

Select one:

a.Because the NPV of the incremental cash flows resulting from a decision is a measure of the increase in the value of the firm as a result of that decision.

b.Because if a cash flow is not an incremental cash flow, it is not really a cash flow - it's an accounting book entry that does not affect the value of the firm.

c.Because incremental cash flows are always positive cash inflows.

d.Because only incremental cash flows are tax-deductible.

2)A mining project requires the purchase of new drillingequipment at a cost of $57500.A further $36000 will bespent on transport, installation and initial maintenance of the equipment, at the very beginning of the project.Of this amount, 25% constitutes maintenance costs and will be written off in Year 1, and the remainder will be capitalised.

What is the value of the equipment for depreciation purposes?

Select one:

a.$57500

b.$66500

c.$93500

d.$84500

3)A project will increase revenue from $1.9 million to $2.6 million.Wages are 50% of revenue.Maintenance on the machine will be $25,000 less than it is on the machine that will be replaced.

What is the incremental revenuethat willresult from accepting this project?(Hint: This is not the same wording as the quiz question built into the video - read it carefully.)

Select one:

a.$0.700 million

b.$0.350 million

c.$0.375 million

d.$0.325 million

4)A machine with a purchase price of $11,000 is to be depreciated over its useful working life of 9 years to a book value of zero, using straight-line depreciation.

What is the book value of the machine after 5 years?

Select one:

a.$4989

b.$9878

c.$4889

d.$9778

5)Project Beta is a 3-year project which requires an initial outlay of $4,000.This outlay will be depreciated usingstraight-line depreciation over the life of theproject.It will generate incremental revenue of $8000 per year and incremental costs (excluding depreciation) of $1300.The tax rate is 40%.

What is the project's annual tax payable?

Select one:

a.$2420

b.$3220

c.$1613

d.$2147