2. An investment project requires an initial outlay of $5m and has expected end-of-year cash inflows of $725,000 for ten years. At the end of the project a $500,000 salvage value is anticipated. This project has an internal rate of return of 1) 6% 2) 7% 3) 8% 4) 9% 5) 10% 3. Which one of the following items should not be included in the cost of a new machine in a budgeting analysis ? 1) The undepreciated capital cost of $1,000 for the existing machine. 2) Special inventory of spare parts for the new machine costing $2,000. 3) Transportation costs of $500 for the new machine. 4) Installation costs of $200 for the new machine. 5) Provincial sales tax on the new machine. 4. Which one of the following statements does not correctly describe the valuation of proposed investments? 1) The opportunity cost of capital is used as the discount rate to calculate the present value of expected cash flows. 2) The present value of the expected cash flows reflects the maximum price to pay today 3) If the net present value of is zero, no new wealth creates by undertaking the investment. 4) If the net present value of an investment exceeds zero, the investor earns less than the expected rate of return. 5) Expected cash flows are estimated on an after-tax basis