1.Which of the following statements about erosion impact on incremental cash flows is most correct?

a. erosion increase incremental taxes

b. erosion increase incremental variable costs

c. erosion decreases incremental sales

d. erosion has no impact on operating cash flows

2.Which of the following incremental cash flows is will occur at the end of every year for the project?

a. operating cash flows

b. changes in net working capital

c. sunk costs

d. the initial capital expenditure

3.All else equal, which of the following regarding the MACRS versus straight-line method is least correct?

a. Straight-line will have higher depreciation expenses at the beginning of the project

b. Straight-linewill have lower operating cash flows at the beginning of the project

c. Straight-line is required by GAAP

d. MACRS often has a positive book value at the end of the project

4.Which of the following should be included in the incremental cash flows for a project?

a. the marketingcost associated with performing market analysis

b. the erosion caused by the implementation of the project

c. the opportunity cost of not using a vacant building for a project

d. interest expense paid on debt acquired to purchase the assets of the project