Part 2: Multiple Choice (10 marks; 2 marks each) 1. One of the key differences between corporate finance and financial accounting courses is: A. the focus on cash flows instead of earnings. B. the focus on marginal tax rates versus average tax rates. C. the role of total income flow versus incremental flows. D. the focus on corporate avarice versus stewardship. 2. What is the nominal rate of interest given a real rate of interest of 5% and an inflation rate of 7%? A. 12.00% B. 2.00% C. 12.35% D. 1.90% 3. Bluedo's has sales of $435,000, depreciation of $35,000, and net working capital of $56,000. The firm has a tax rate of 34% and a profit margin of 8%. The firm has no interest expense. What is the amount of the operating cash flow? A. $46,068 B. $57,968 C. $69,800 D. $322,100 E. $114,340 4. Marshall's & Co. purchased a corner lot in Montreal five years ago at a cost of $640,000. The lot was recently appraised at $810,000. At the time of the purchase, the company spent $50,000 to grade the lot and another $4,000 to build a small building on the lot to house a parking lot attendant who has overseen the use of the lot for daily commuter parking. The company now wants to build a new retail store on the site. The building cost is estimated at $1.2 million. What amount should be used as the initial cash flow for this building project? A. $1,200,000 B. $1,840,000 C. $1,890,000 D. $2,010,000 E. $2,060,000 5. Money that the firm has already spent or is committed to spend regardless of whether a project is taken is called a(n): A. sunk cost. B. opportunity cost. C. erosion. D. fixed cost