Question 20 (1 point)

What is the effect on a firm's net working capital (NWC) if a new project requires $30,000 increase in inventory, $10,000 increase in accounts receivable, $35,000 increase in long-term assets, and a $20,000 increase in accounts payable?

Question 20 options:

	+$20,000
	-$5,000
	+$10,000
	+$55,000

Question 1 (1 point)

A 6-year new project requires $100,000 to purchase a machine today. This machine follows a straight line depreciation over six years with salvage value of $0. The project will provide $23,000 in free cash flows annually for six years. Suppose the free cash flows occur at the end of each year. The project also requires a $5,000 in net working capital today, which will be fully recovered at the end of year 6. If the discount rate is 14% per year, the project's NPV is ___.

Question 1 options:

	-$13,283
	-$15,561
	$15,561
	$13,283

Question 2 (1 point)

Capital budgeting analysis focuses on the NPV of all future profits.

Question 2 options:

	True
	False

Question 3 (1 point)

We have introduced three types of uncertainty analysis.

Question 3 options:

	True
	False

Question 4 (1 point)

When is it appropriate to include sunk costs in capital budgeting?

Question 4 options:

	Include sunk costs when they are relatively small.
	Include sunk costs when they are relatively large.
	Never include sunk costs.
	Include sunk costs whey they improve the project's incremental earnings.

Question 5 (1 point)

Opportunity costs do not affect a project's NPV calculation.

Question 5 options:

	True
	False

Question 6 (1 point)

Home Builder Supply is contemplating building a new retail store. It already purchased the land for this store, which currently has an abandoned warehouse located on it. The marketing dept. spent $10,000 on market research to determine the extent of customer demand for the new store. Which of the following should NOT be included in capital budgeting calculation?

Question 6 options:

	The cost of the land.
	The cost of market research.
	The cost of demolishing the abandoned warehouse and clearing the lot.
	All of the above

Question 7 (1 point)

In sensitivity analysis, we will change the values of two or more parameters.

Question 7 options:

	True
	False

Question 8 (1 point)

In our capital budgeting discussion, we ignore the financing for the new project.