1. Which of the following is most likely to cause a firm to use less financial leverage?

A. currently low profits, but a large need for new funds

B. concern for the firms Moodys and S & P bond ratings

C. low business risk

D. avoidance of a corporate takeover

2. Which one of the following would not typically be considered a capital budgeting project for a restaurant?

A. renovating the ladies restroom

B. installing a new fire suppression and alarm system

C. buying a new dishwashing system

D. buying toilet paper for both the ladies and mens restrooms

3. Poons Noodle House is considering replacing their noodle-processing machine. The current machine was purchased 4 years ago at a total cost of $20,000. It is being depreciated straight-line to a zero value over 8 years. If Poon sells the noodle-processing machine for $13,000, what is the after-tax cash flow to Poons Noodle House? Use 40% for the effective tax rate.

A. $11,800

B. $7,800

C. $11,200

D. $5,200