4. You spent and you are trying to deci analyzing the brake pent S500 last week

Question

4. You spent and you are trying to deci analyzing the brake pent S500 last week fixing the transmisson in your car. Now, the brakes are acting up analyzing the brake deside whether to fix therm or trade the car in for a newer model. In e situation, the S500 you spent fixing the transmission is a(n)--cost. A. opportunity B. fixed D. sunk E. relevant 5. Which one of these is an example of erosion that should be included in project analysis? A. The anticipated loss of current sales when a new product is launched. B. The expected decline in sales as a new product ages. C. The reduction in your sales that occurs when a competitor introduces a new product. D. The sudden loss of sales due to a major employer in your community implementing massive layoffs. E. The reduction in sales price that will most likely be required to sell inventory that has aged 6. Assume a firm has no interest expense or extraordinary items. Given this, the operating cash flow can be computed as: A. EBIT - Taxes. C. D. E. EBIT × (1-Tax rate) + Depreciation x Tax rate. (Sales - Costs) x (I - Tax rate). EBIT- Depreciation+ Taxes. Net income + Depreciation. 7. For a profitable firm, an increase in which one of the following will increase the cash flow? A. employee salaries B. office rent C. building maintenance D. depreciation E. equipment rental

Explanation / Answer

7-D depreciation because depreciation is a non cash expenditure and would be added back to operating profit

6- E net income+ depreciation because depreciation is a non cash expenditure and would be added back to operating profit

5- A - the anticipated loss of current sales when a new product is launched

4- answer is D sunk cost because investment made are sunk cost

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