Questions 5-15 pertain to the same project.

Below is the depreciation table of the capital investment.

Year	Rate	Depreciation	accumulated depreciation	book value
1	20.00%	$240,000
2	20.00%	$240,000
3	20.00%	$240,000	?	?
4	20.00%	$240,000
5	20.00%	$240,000

10. Below is the inremental cash flow table.

	Year 0 (NOW)	Year 1	Year 2	Year 3
operating cash flow
capital investment	$ (1,200,000.00)
change in the net working capital	$ (54,000.00)			$ 54,000.00
salvage of the capital investment				?
Incremental cash flow	?		?	?

What's the incremental cash flow at year 0 (right in the beginning of the project)?

A.		-$1,200,000
B.		-$930,000
C.		$324,000
D.		-$1,254,000

11. What's the incremental cash flow of the projct at year 2?

A.		$378,000
B.		$270,000
C.		$324,000
D.		$0

12. What's the cash flow received by salvaging the equipment at year 3 (end of the project)? Recall that the company will be able to sell the equipment for $500,000 at the end of the project (year 3).

A.		$494,000
B.		$480,000
C.		$240,000
D.		$500,000

13. What's the incremental cash flow of the project at year 3?

A.		$548,000
B.		$324,000
C.		$818,000
D.		$872,000

14 Assuem that this project needs a new office space. You would include the rent of the new office space in .

A.		Fixed cost
B		You don't include it, it is an irrelevant cost.
C.		Production cost
D.		Capital investment

15. Assume that your company has paid $10000 to an accounting expert to estimate the production costs and fixed costs based on the historical costs in the companys financial statements. You would include that cost in .

A.		Labor/production cost
B.		Nowhere because it is a sunk cost
C.		Investment in net working capital
D.		Fixed cost