Question 8 0.55 pts A project will produce cash inflows of $5,000 each year for three years. It requires a new piece of equipment costing $9,000 that will have no value after the three years. Taxes are 40 percent. The discount rate is 10 percent. There are two possible methods of taking depreciation: straight line or accelerated. The straight line depreciation will be $3,000 per year. The accelerated depreciation will be $4,000 the first year; $3,000 the second year; and $2,000 the third year. What is the additional depreciation tax shield of using accelerated depreciation compared to straight-line depreciation? For this, I'm using Table 3-9 on about page 102 $0 $63 $2.984 $3,047 Question 9 0.55 pts Condorcet's jury theorem was an easy way to introduce a capital budgeting committee. Following that idea, suppose there is a three member committee, with each committee member likely to vote correctly 70 percent of the time. A proposal requires a majority vote to pass. The members of the committee make independent assessments and vote independently. What is the effect of adding two additional members who similarly have a 70 percent chance of voting correctly? The chances of a correct majority vote will increase The chances of a correct majority vote will not change The chances of a correct majority vote will decrease Question 10 0.55 pts What is the present value of an annuity of $1,000 at the end of each year, in perpetuity, when the discount rate is 5 percent? A permanent annuity is the same thing as an annuity in perpetuity. $2,000 $10,000 $20,000 $100,000 Question 11 0.55 pts An annuity of $1,000 at the end of each year lasts in perpetuity. However, we do not have access to the annuity until ten years have elapsed. The discount rate is 5 percent. What is the present value now? 0.614 $20,000 $20,000 $0.614 $10,000 7.722 $20,000 Question 12 0.55 pts What is the present value of cash inflows where the first inflow is $1,000 and each inflow after that increases by 1 percent each year. The discount rate is 5 percent. What is the present value? $1,000 / (0.05 +0.01) $1,000 / 0.01 $1,000 / 0.05 $1,000 / (0.05 -0.01)