Question 1 9 points Save Answer Pizza House is a local restaurant chain that is contemplating opening its tenth restaurant in town and is starting the capital budgeting process for the new restaurant. The company already purchased the land on which the new restaurant will be built two years ago for $500,000. In addition, the company spent $15,000 for a marketing study last year to determine whether there is enough demand for the new restaurant. Which of the following items should not be included in the free cash flow calculations for the project? Select all that apply. 1. Construction costs of $300,000 for the new restaurant w ll. The $500,000 cost of the land. III. The interest expense if the project is financed with debt. IV. The loss of sales if customers from one of the other restaurants start dining at the new restaurant instead. V. The current value of the land if it were sold. There is currently an offer for $510,000 from an interested buyer. VI. The $15,000 cost of the marketing study. Question 2 8 points Save Answer You are trying to assess a new project for you company. To that end you have put together some forecast for year 1 of the project in the table below. Using this information, calculate the free cash flow for year 1 of this project. Express the free cash flow in 5 millions and round to two decimals (do not include the $-sign in your answer). Project Forecasts for Year 1 (in S millions) Sales 154 Cost of sales 42 Selling, general and administrative expenses 7 Depreciation 31 Increase in Net Working Capital 5 Capital expenditures 36 Marginal corporate tax rate 2996 Question 3 8 points Save Answer You are trying to assess how different depreciation methods will affect the free cash flows of a project for you company. The current forecasts for year 1 of the project are in the table below. Assume that you can decrease the depreciation expense by $11 million in year 1. By how much would the free cash flow in year 1 change as a result? Express your result in $-millions and round to two decimals (do not include the $-sign in your answer). Enter increases in free cash flows as positive numbers, decreases as negative numbers. Project Forecasts for Year 1 (in 5 millions) Sales 134 Cost of sales 54 5 25 Selling, general and administrative expenses Depreciation Increase in Net Working Capital Capital expenditures Marginal corporate tax rate 5 38 2496