Recaptured depreciation and terminal loss occur when:

1) straight-line depreciation percentages are doubled.

2) a business terminates an asset pool.

3) depreciable percentages decline throughout the asset's class life.

4) all assets are depreciated over five years.

Capital budgeting proposals should be evaluated as if the project were financed:

1) entirely by equity.

2) half by debt and half by equity.

3) with the highest cost source of funds, to be safe.

4) entirely by debt.

How does net working capital affect the NPV of a five-year project if working capital is expected to increase by $25,000 and the firm has a 15% cost of capital?

1) NPV will decrease by $25,000

2) NPV will increase by $9,322

3) NPV will decrease by $12,571

4) NPV will increase by $12,571

Which of the following costs probably should not be allocated to the investment needed for a new project?

1) 25 percent of the vice president's salary.

2) increase in accounts receivable.

3) labor expense for employees in new warehouse.

4) new warehouse, built for this project.

A project anticipates net cash flows of $10,000 at the end of year one, with such amount growing at the expected 5 percent rate of inflation over the subsequent four years. Calculate the real present value of this five-year cash stream if the firm employs a nominal discount rate of 15 percent.

1) $33,522

2) $43,294

3) $55,000

4) $38,377

Capital budgeting projects typically assume that all cash flows transpire at the end of the year. The reason for this is that:

1) it is easier for the analyst in this manner.

2) less tax liability results from this practice.

3) balance sheets are prepared at the end of the year.

4) most corporations collect their cash at the end of the year.