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Working Capital Quiz

If the depreciation amount is $100,000 and the marginal tax rate is 30%, then the tax shield due to depreciation is:

Two machines, A and B, which perform the same functions, have the following costs and lives. 
PV of CostsLife
Machine A6,0008
Machine B8,00012
 Which machine would you choose? The two machines are mutually exclusive and the cost of capital is 10%.

Opportunity costs should not be included as they are missed opportunities.

Do not forget to include interest and dividend payments when calculating the project's cash flow.

Depreciation acts as a tax shield in reducing taxes

For NPV calculations:

A reduction in the sales of existing products caused by the introduction of a new product is an example of an opportunity cost.

Which of the following is not included in working capital?

A new manufacturing project uses land which could otherwise be sold. This land is an example of

In the first year of a project inventories decrease by $50,000, accounts payables decrease by$20,000 and accounts receivables increase by $30,000. What is the change in working capital?

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