(21-25) 1.ABC Engineering just purchased a new machine. All of the following are

Question

(21-25)

1.ABC Engineering just purchased a new machine. All of the following are examples of incremental cash flows except _______________.

2.Equipment was purchased for $45,000 plus $2,000 in freight charges. Installation costs were $1,500 and sales tax totaled $1,000. Hiring a special consultant to provide advice during the selection of the equipment cost $3,000. What is this asset's depreciable basis?

3.A local bank is contemplating opening a new branch bank in a large superstore across town from their main office. It is estimated that the new branch will generate $20,000 after expenses each month. The manager wonders if all these revenues should be considered an incremental cash flow. Given this information, which of the following statements is correct?

4.AB Mining Company just commissioned a firm to identify if an unused portion of their mine contains any silver or gold at a cost of $125,000. This is an example of a(n) _______________.

5.If a firm has already paid an expense or is obligated to pay one in the future, regardless of whether a particular project is undertaken, that expense is a(n) ________________.

Freight charged to ship the machine Developmental costs to determine which machine would best work with their unique process Increase in electric bill to run the machine Reduction in maintenance expense associated with the new machine

Explanation / Answer

1. Developmental costs to determine which machine would best work with their unique process

2. $52500

3. $20,000 is generated by the new branch bank and therefore it is an incremental cash flow.

4. incremental cash flow

5. sunk cost

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