1. Income tax effects are associated with all of the following except:

Effect of depreciation expense associated with an investment project.

Annual net benefits associated with a proposed investment.

Disposition (i.e., sale) of an existing asset.

Sale of an investment asset at the end of the asset's useful life.

Required increase in net working capital associated with an investment project.

2. If the present value payback period is less than the life of the project, one may conclude that:

The project's accounting (book) rate of return exceeds the discount (hurdle) rate.

The project's internal rate of return (IRR) is less than the discount (hurdle) rate.

The project's IRR is equal to the weighted-average cost of capital.

The project is not desirable in a present-value sense.

The project's net present value (NPV) is positive.

3. Especially for projects with long lives, estimation of revenues (or benefits), costs, and cash flows of a capital investment project is a difficult task principally because of:

		The lack of good data.
		Income tax effects.
		The large dollar amounts involved.
		Lack of available forecasting tools.
		Uncertainty about future events.