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Question 16 (5 points) A firm is considering a project that requires $150,000 of fixed assets that are classified as 7-year property for MACRS. What
Question 16 (5 points) A firm is considering a project that requires $150,000 of fixed assets that are classified as 7-year property for MACRS. What is the accumulated depreciation of these assets at the end of year 6? Year 1 2 3 4 5 6 7 8 % 14.29 24.49 17.49 12.49 8.93 8.93 8.93 4.45 $20,070 $129,930 $116,535 $18,732 Question 17 (5 points) Kennesaw Cupcakes has experienced growing sales and management is looking to expand. They currently own a lot on Main Street, a good location for a retail shop as indicated by a marketing survey. The survey cost was $20,000. The lot was purchased five years ago at a cost of $200,000. Today, the property could be sold for only $180,000 because of the drop in real estate prices. The land will have to be cleared before a new shop can be built at a cost of $40,000. The company can then build a new shop at an estimated cost of $240,000. In addition, management recently allocated $86,000 in existing executive salaries to the new store. What is the cost of this expansion project? $567,000 $460,000 $546,000 $440,000 Question 18 (5 points) A project provides cash inflows of $525 each year for five years. What is the payback period if the cost is $2,300? 3.4 years 3.91 years 4.38 years None of the above Question 19 (5 points) Your firm is considering two projects that are mutually exclusive. You have computed the NPVs at the firm's required return and find the following: NPV Project A $12.896 NPV Project B $14,622 What is your recommendation? Reject both projects, Accept B. Accept A. Accept A and B. Question 20 (5 points) Saved The underlying problem with the IRR approach is that it assumes that the cash flows are reinvested at the required return. True False
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