1. Which of the following would NOT be considered a capital budgeting decision?

A. Caterpillar replaces manufacturing equipment with more efficient new equipment.

B. Morgan Stanley installs elevators to comply with the Americans with Disabilities Act.

C. Walmart purchases inventory for resale to customers.

D. Pfizer develops a new therapy and brings it to market.

2. Delta Inc. is consiering the purchase of a new machines which is expected to increase sales by $10,000 in addition to increasing non-depreciation expenses by $3,000 annually. Due to the sales increase, Delta expects its working capital to increase $1,000 during the life of the project. Delta will depreciate the machine using the straight-line method over the project's five year life to a salvage value of zero. The machine's purchase price is $20,000. The firm has a marginal tax rate of 34%, and its require rate of return is 12 percent. The machine's after-tax incremental cash flow in year five is:

A. 8620

B. 7120

C. 6980

D. 5980

3. Incremental cash flows from a project=

A. Firm cash flows with the project minus firm cash flows without the project.

B. Firm cash flows with the project plus firm cash flows without the project.

C. Firm cash flows without the project plus or minus changes in net income.

D. Firm cash flows without the project plus or minus changes in revenue with the project.

4. (IRR Calculation) Your investment advisor has offered you an investment that will provide you with a signle cash flow of $11,500 at the end of 15 years if you make an annual payment of $150 per year in the interim period. Specificially the annual payments beging immediately and extend through the end of year 14. You then receive the $11,500 at the end of year 15. Find the internal rate of return on this investment.