A. The ABC company is considering investing in a new project. In order to finance this project, ABC will issue $4,000,000 in bonds with a coupon rate of 6%. Should the dollar interest cost from these bonds be considered in the annual net cash flow calculations? Why or why not?

B. As you increase the discount rate, what happens to the following:

Discounted payback period _______________

Profitability index _______________

C. Explain the advantage of accelerated depreciation methods through the use of the depreciation tax shield.

D. Briefly explain how one would account for a terminal value as on-going concern in capital budgeting cash flow analysis. (A formula would help here).