(21-25)

1.ABC Engineering just purchased a new machine. All of the following are examples of incremental cash flows except _______________.

	Freight charged to ship the machine
	Developmental costs to determine which machine would best work with their unique process
	Increase in electric bill to run the machine
	Reduction in maintenance expense associated with the new machine

2.Equipment was purchased for $45,000 plus $2,000 in freight charges. Installation costs were $1,500 and sales tax totaled $1,000. Hiring a special consultant to provide advice during the selection of the equipment cost $3,000. What is this asset's depreciable basis?

	$51,500
	$49,500
	$48,500
	$52,500

3.A local bank is contemplating opening a new branch bank in a large superstore across town from their main office. It is estimated that the new branch will generate $20,000 after expenses each month. The manager wonders if all these revenues should be considered an incremental cash flow. Given this information, which of the following statements is correct?

	$20,000 is generated by the new branch bank and therefore it is an incremental cash flow.
	We would first need to assess the opportunity cost of placing a branch in a different location to answer this question.
	Some amount less than the $20,000 is incremental because of substitutionary effects.
	Some amount less than the $20,000 is incremental because of complementary effects.

4.AB Mining Company just commissioned a firm to identify if an unused portion of their mine contains any silver or gold at a cost of $125,000. This is an example of a(n) _______________.

	Opportunity cost
	Sunk cost
	Incremental cash flow
	Relevant cash flow

5.If a firm has already paid an expense or is obligated to pay one in the future, regardless of whether a particular project is undertaken, that expense is a(n) ________________.

	Incremental cash outflow
	Opportunity cost
	Sunk cost
	Expensible item