21. To compute the operating cash flow for a project, we should NOT consider which one of the following?

A. taxes

B. variable costs

C. interest expense

D. fixed costs

E. depreciation tax shield

22. Cougs Bookstore is considering adding a coffee shop inside the store. Which of the following should be considered incremental cash flows of the coffee shop project?

I. increased book sales due to new customers attracted by the coffee shop

II. research fees spent on analyzing campus demand for the coffee products

III. utilizing an empty corner space owned by the bookstore to host the coffee shop

IV. hiring additional employees to handle the work in the coffee shop

A. I and IV only

B. III and IV only

C. I, II and III only

D. I, III and IV only

E. I, II, III and IV

23. The operating cash flow of a cost cutting project:

A. is equal to zero because there are no incremental sales.

B. can be positive even though there are no increased sales.

C. can only be analyzed by projecting the sales and costs for a firm's entire operations

D. is equal to the depreciation tax shield.

24. Which one of the following will decrease an optimal bidding price? I. an increase in the salvage value

II. an increase in the fixed costs III. a decrease in the required rate of return

IV. an increase in the firm's tax rate

A. I only

B. III only

C. II and III only

D. I and III only

E. I, II, and IV only

25. Northern Outdoors, Inc. is considering a new project. The project has a 4-year life and requires an initial fixed asset investment of $2.2 million. The project is estimated to generate $1,860,000 in annual sales, with annual costs of $755,000. The fixed asset will be depreciated straight-line to zero over its 4-year project life, after which time it will have a market value of $152,000. The project requires an initial investment in net working capital of $250,000. The tax rate is 35 percent and the required return for the project is 15 percent. What is the net present value for this project?

A. $380,016

B. $349,599

C. $293,110

D. $206,661

E. None of the above