TRUE or FALSE The change in Net Working Capital regardless of whether an increas
ID: 2636373 • Letter: T
Question
TRUE or FALSE
The change in Net Working Capital regardless of whether an increase or a decrease is taxable because the value of this change appears on the firms income statement in the fiscal year in which it occurs.
If a fixed asset is sold for less than its book value, the loss on the sale may be used to offset the firms ordinary operating income.
Incremental operating cash inflows are the focus of capital budgeting analysis, as the firm is concerned with the change in its operating cash inflows that result from the proposed project.
If a projects Net Present Value (NPV) is greater than $0, the project should be rejected; if the projects NPV is less than $0, the project should be accepted.
The Net Present Value(NPV) is generally viewed as an unsophisticated capital budgeting technique, as it does not explicitly consider the time value of money on cash flows to be received in the future.
If a projects payback period is less than the maximum acceptable payback period, the project should be rejected.
Explanation / Answer
The change in Net Working Capital regardless of whether an increase or a decrease is taxable because the value of this change appears on the firms income statement in the fiscal year in which it occurs.(True)
If a fixed asset is sold for less than its book value, the loss on the sale may be used to offset the firms ordinary operating income.(True)
Incremental operating cash inflows are the focus of capital budgeting analysis, as the firm is concerned with the change in its operating cash inflows that result from the proposed project.(True)
If a projects Net Present Value (NPV) is greater than $0, the project should be rejected; if the projects NPV is less than $0, the project should be accepted.(False)
The Net Present Value(NPV) is generally viewed as an unsophisticated capital budgeting technique, as it does not explicitly consider the time value of money on cash flows to be received in the future.(False)
If a projects payback period is less than the maximum acceptable payback period, the project should be rejected.(False)
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