1. Which item(s) in the income statement shown above will not affect cash flows? (You may select more than one answer.

Sales

Variable expenses

Advertising, salaries, and other fixed out-of-pocket costs expenses

Depreciation expense

2. What are the projects annual net cash inflows?

3. What is the present value of the projects annual net cash inflows?

4. What is the present value of the equipments salvage value at the end of five years?

5. What is the projects net present value?

6. What is the project profitability index for this project?

7. What is the projects payback period?

8. What is the projects simple rate of return for each of the five years?

12. If the equipments salvage value was $700,000 instead of $500,000, what would be the projects simple rate of return?

13. Assume a postaudit showed that all estimates (including total sales) were exactly correct except for the variable expense ratio, which actually turned out to be 45%. What was the projects actual net present value?

14. Assume a postaudit showed that all estimates (including total sales) were exactly correct except for the variable expense ratio, which actually turned out to be 45%. What was the projects actual payback period?

15. Assume a postaudit showed that all estimates (including total sales) were exactly correct except for the variable expense ratio, which actually turned out to be 45%. What was the projects actual simple rate of return?