9. Mohammed Bayyoud corp. expects to earn $600,000 if the economy is good and only $200,000 if the economy is bad. Mohammed estimates a 65% probability of a good economy and a 35% probability of a bad economy. The NPV of the project with a discount rate of 20%? Can Mohammed accept the project?

a.

NPV - $16,666.67 No, Mohammed Should reject the project

b.

NPV -$19,181.82, No, Mohammed Should Accept the project

c.

NPV -$19,181.82, Yes, Mohammed Should Accept the project

d.

NPV - $16,666.67 yes, Mohammed should accept the projects

When you spend money for marketing analysis, is this considered a capital budgeting decision.

a.

TURE

b.

FALSE

6. Bethlehem corp. borrows $20,000 at 5% and invests in a new machine with a useful life of 5 years. The new Machine generates additional revenues of $10,000/year and additional cost of $2,000/year. The corporation tax rate is 30%. The NET ICOME IS

a.

3,100

b.

2,100

c.

3,000

d.

2, 000