Determine what is tax shield resulting from tax-deductible

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Problem 1: A project will incur $700 in shutdown costs the year after the completion of the project. The tax rate is 40%. What is the tax shield resulting from these tax-deductible shutdown costs (where a negative number means a cash outflow and a positive number means an incremental cash inflow)?

Select one:

a. $-280
b. $280
c. $240
d. $-240

Problem 2: Which of the following cash flows is NOT a free cash flow associated with a project?

Select one:

a. The funds obtained from selling an old factory if a decision is made to build a new factory.
b. The interest on a loan taken out to build a new factory.
c. Payments to an architect to design a new factory.
d. The costs of building a new factory.

Reference no: EM132726397

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