Question 1a) To determine the \"cash foregone\" regarding the sale price of the

Question

Question 1a) To determine the "cash foregone" regarding the sale price of the land, we arrive at this value by doing the following:

Subtracting the tax on the gain from the sales price of the land.

  Subtracting the cost of land from the sales price of the land.

  Subtracting the depreciation from the sales price of the land.

  Subtracting the cost and tax on the gain from the sales price of the land.

Question 1b)

When we have projects which have unequal lives an easy way to arrive at a correct decision as to which project is to be picked is to use the Equivalent Annual Annuity method. This method:

Translates the NPV into a series of annuities in the future

Translates the IRR into an NPV

Translates the NPV into equal NPV amounts in the future

Translates the discounted value of the outflow into equal payments in the future

Question 1c)

Based on a five year MACRS depreciation schedule, depreciation will occur over a ____ period.

6 year period

5 year period

4.5 year period

7 year period

Explanation / Answer

1a) Subtracting the cost and tax on the gain from the sales price of the land.

1b) Translates the NPV into equal NPV amounts in the future.

1c) 6 year period.

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