Reference no: EM131521846

Please answer the following questions:

1. The internal rate of return is best described as that discount rate that:

a. equates the NPV and IRR

b. makes the NPV equal zero

c. equals the required rate of return

d. equates all cash flows to the current market rate that:

2. Independent projects:

a. do not compete with each other

b. do compete with each other

c. can be mutually exclusive under certain conditions

d. always have negative NPVs

3. If a new machine requires an increase in current assets from $50,000 to $60,000 and current liabilities from $30,000 to $50,000, the dollar change in net working capital is:

a. negative

b. positive

c. zero

d. undefined

4. When the used asset is eventually sold for less than its depreciated book value:

a. then the difference is taxed as ordinary income

b. there are no tax effects

c. there is a capital gain tax

d. The firm’s tax liability is reduced by the amount of the difference times the ordinary income tax rate

5. The sales break-even point is defined as:

a. the level of sales that a firm must reach to cover fixed costs

b. the level of income that a firm must reach to cover variable costs

c. the level of sales that a firm must reach to cover all operating costs

d. the point where operating income equals fixed costs