1) Upon which of the following items does discounted cash flow methods for capital budgeting focus? 1) A) operating income and cost of capital B) cash inflows and required rate of return C) working capital and cost of capital D) operating income and required rate of return Cleaners has been considering the purchase of an industrial dry-cleaning machine. The 2) existing machine is operable for three more years and will have a machine is disposed now, it may be sold for $100,000. The new machine will cost $430,000 and an additional cash investment in working capital of $100,000 will be required. The new machine will reduce the average amount of time required to wash clothing and will decrease labor costs. The investment is expected to net $140,000 in additional cash inflows during the first year of acquisition and $270,000 each additional year of use. The new machine has a three-year life, and zero disposal value. These cash flows will generally occur throughout the year and are recognized at the end of each year. Income taxes are not considered in this problem. The working capital investment will not be recovered at the end of the asset's life zero disposal price. If the What is the net present value of the investment, assuming the required rate of return is 9%? Would the company want to purchase the new machine? A) $208,440; no B) S(134,160); no C) S(208,440); yes D) $134,160; yes 3) If the net present value for a project is positive, which of the following is true? 3) A) its internal rate of return is more than its cost of capital B) its internal rate of return is less than its cost of capital C) its expected rate of return is below the required rate of return D) the project should be accepted because its expected rate of return is greater than the cost of capital 4) Forge Company wants to purchase a new cutting machine for its sewing plant. The investment 4) is expected to generate annual cash inflows of $140,000. The required rate of return is 10% and the current machine is expected to last for seven years. Of the following choices, which is the dollar amount the company would be willing to spend for the machine, assuming its life is also seven years? Income taxes are not considered A) $702,660 B) $1,328,180 C) $882,000 D) $681,520 TRUE/FALSE. Write T if the statement is true and 'F if the statement is false. 5) 5) The net present value (NPV) method calculates the expected monetary gain or loss from a project by discounting all expected future cash inflows and outflows back to the present point in time using the required rate of return