Pocus Co. is considering a four-year project that has an initial outlay or cost of RM100,000. The respective future cash inflows from its project for years 1, 2, 3 and 4 are: RM50,000, RM40,000, RM30,000 and RM20,000. Will it accept the project if it's payback period is 26 months?

Yes, because it pays back in 25 months.

No, because it pays back in over 31 months.

No, because it pays back in over 35 months.

No, because it pays back in 28 months.

Whenever a new product competes against a company's already existing products and reduces the sales of those products,________costs occur.

sunk

erosion

opportunity

working capital

Which of the statements below is TRUE?

Decreases in accounts receivables constitute a use of cash flow because you are helping your customers finance their purchases.

The increase in working capital accounts necessary to support a project also provides for cost increases at the end of the project.

Decreases in accounts payable constitute a source of cash flow because you are using your suppliers to help finance your business operations.

An increase in working capital can be brought about by an increase in inventory.

Erosion is the additional cash generated by a new project beyond the current cash flow with the addition of a specific new project.

True

False

There are two main reasons why we need to deal with depreciation. Which of the below is one of these reasons?

The tax rate implications from the OCF

The tax flow implications from the OCF

The loss but not the gain when a capital asset is disposed

The gain but not the loss when a capital asset is disposed

The advantage of MACRS over straight-line depreciation is that you can write off more of your capital costs in the ________ years.

earlier

later

last

middle

When a depreciable asset is sold, a tax gain or tax loss on disposal is calculated, based on the ________ of the asset at the time of disposal.

difference in book and market values

difference in market value and salvage value

market value only

book value only

The current book value of an asset serves as the basis for determining the gain or loss at disposal.

True

False

When computing the total cash outflow needed to start a project, we must include any change in ________.

working capital

earnings

dividends

net income