BUS 401 Week 3 Quiz (New)

1. You receive an annual raise of $4,000. If you tax rate is 22%, how much will this increase your after-tax earnings?

2. When determining the cash flows for a proposed investment, we generally ignore overhead. Many overhead costs are fixed and will be paid whether the project is accepted or not, so they are not incremental. Which item on the following list, though similar to overhead, would be included as an incremental cash flow?

3. GMX Resources, an independent oil and gas exploration and production company, has a tax rate of 38%. If it purchases $2,000,000 of drilling pipe, what is the after-tax cost of this expenditure?

4. The key to successful capital budgeting is to:

5. Which of the following is a problem associated with bankruptcy?

6. If depreciation expense is a noncash charge, why do we consider it when determining cash flows?

7. All else being equal, as debt replaces equity in a profitable company’s capital structure, which of the following occurs?

8. Chapter 7 introduced three methods for evaluating a corporate investment decision. Which of the following is not one of those methods?

9. To determine incremental cash flows, we apply the with-and-without principle, which compares:

10. According to the NPV acceptance criterion, projects: