When evaluating the incremental operating cash flows associated with a capital budgeting project, depreciation must be considered because:

	a.	it has an impact on the taxes paid by the firm, which is a cash flow.
	b.	it represents a tax-deductible cash expense.
	c.	the firm has a cash outflow equal to the depreciation expense each year.

Question 2

Which of the following is most accurate?

	a.	If the NPV of a project is positive, accepting the project increases the value of the firm.
	b.	The internal rate of return of a project is lower than the discount rate used if the NPV of the project is positive.
	c.	A project's discounted payback period is longer than its useful life whenever project's NPV is positive.

Question 1

Alpha Inc.'s common stock currently sells for $40 per share, but the firm will net only $34 per share from the sale of new common stock. The firm recently paid a dividend of $2 per share on its common stock, and investors expect the dividend to grow indefinitely at a constant rate of 10 percent per year. Which of the following is the cost of newly issued common stock? (Round off the answer to two decimal places.)

	a.	14.12 percent
	b.	16.47 percent
	c.	17.53 percent

Question 6

Zebco Inc is evaluating a project that has a cost of $1,000 and will produce end-of-year net cash inflows of $500 per year for 3 years. The required rate of return for this project's is 10 percent. The difference between the project's IRR and its MIRR is closest to:

	a.	5.09%
	b.	5.75%
	c.	4.31%