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Bài test tiếng Anh ngành ngân hàng và đáp án phần 11

Parrino, 2e, Test Bank, Chapter 11

Format: True/False
Learning Objective: LO 1
Level of Difficulty: Easy
1. The term incremental in the context of incremental after-tax free cash flows refers to
the fact that the firm's total after-tax free cash flows will change if the new project is
adopted.
A) True
B)

False

Ans: A

Format: True/False
Learning Objective: LO 1
Level of Difficulty: Easy
2. Conceptually, free cash flows are what is left over for distribution to creditors and
stockholders after the firm has made the necessary investments in working capital and
long-term assets.

A) True
B)

False

Ans: A

Format: True/False
Learning Objective: LO 1
Level of Difficulty: Medium
3. Incremental cash flow from operations is the cash flow from a project that is expected
to be generated after all operating expenses and taxes have been paid.
A) True
B)

False

Ans: A

Format: True/False
Learning Objective: LO 1
Level of Difficulty: Easy
4. The purchase of a factory building for a prospective project is an example of an
incremental addition to working capital.
A) True
B)

False

Page 1


Ans: B

Format: True/False
Learning Objective: LO 1
Level of Difficulty: Medium
5. If a firm expects to increase its investment in inventory due to a prospective project,
then this is an example of an incremental capital expenditure.
A) True


B)

False

Ans: B

Format: True/False
Learning Objective: LO 1
Level of Difficulty: Easy
6. The stand-alone principle says that we can treat a project as if it were a stand-alone firm
that has its own revenue, expenses, and investment requirements.
A) True
B)

False

Ans: A

Format: True/False
Learning Objective: LO 1
Level of Difficulty: Easy
7. If you start with incremental net operating profits after tax (NOPAT) and add
depreciation and amortization to it, then you will obtain incremental cash flow from
operations.
A) True
B)

False

Ans: A

Format: True/False
Learning Objective: LO 1
Level of Difficulty: Easy
8. Free cash flow equals cash flow from operations minus required investments.
A) True

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B)

False

Ans: A

Format: True/False
Learning Objective: LO 3
Level of Difficulty: Easy
9. Increases in working capital are considered cash flows associated with investments.
A) True
B)

False

Ans: A

Format: True/False
Learning Objective: LO 2
Level of Difficulty: Easy
10. Accounting earnings are a reliable measure of the costs and benefits of a project.
A) True
B)

False

Ans: B

Format: True/False
Learning Objective: LO 2
Level of Difficulty: Easy
11. If taken without accompanying changes in cash flow, changes in a company's
accounting earnings do not impact the overall value of the firm.
A) True
B)

False

Ans: A

Format: True/False
Learning Objective: LO 2
Level of Difficulty: Easy
12. Allocated costs such as corporate overhead should be included in cash flow
calculations.
A) True

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B)

False

Ans: B

Format: True/False
Learning Objective: LO 2
Level of Difficulty: Easy
13. The impact of a project on another project's cash flows should be ignored.
A) True
B)

False

Ans: B

Format: True/False
Learning Objective: LO 2
Level of Difficulty: Easy
14. Opportunity costs should always be included in the cash flow calculations of a project.
A) True
B)

False

Ans: A

Format: True/False
Learning Objective: LO 2
Level of Difficulty: Easy
15. The research and development costs to date of a project should be considered when
analyzing the cash flows of a prospective project.
A) True
B)

False

Ans: B

Page 4


Format: True/False
Learning Objective: LO 2
Level of Difficulty: Medium
16. Since our perspective when evaluating a project is that of all of the investors in the
firm, creditors as well as stockholders, then we should evaluate the pretax cash flows
produced by a project.
A) True
B)

False

Ans: B

Format: True/False
Learning Objective: LO 2
Level of Difficulty: Easy
17. Since our perspective when evaluating a project is that of all the shareholders only, then
we should evaluate the after-tax cash flows produced by a project.
A) True
B)

False

Ans: B

Format: True/False
Learning Objective: LO 2
Level of Difficulty: Medium
18. BioGeological Pharmaceuticals invested $100 million on a heart drug that does not
prevent heart disease. BioGeological has since found that the drug does prevent
diabetes. When considering whether to market the drug as a diabetic panacea, the firm
should consider the $100 million spent while investigating the heart-related effects.
A) True
B)

False

Ans: B

Format: True/False
Learning Objective: LO 2
Level of Difficulty: Easy
19. When analyzing a project, if the expected future cash flows are denominated in nominal
dollars, then the discount rate should represent a nominal rate as well.
A) True

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B)

False

Ans: A

Format: True/False
Learning Objective: LO 2
Level of Difficulty: Easy
20. Nominal interest rates incorporate the expected rate of inflation.
A) True
B)

False

Ans: A

Format: True/False
Learning Objective: LO 2
Level of Difficulty: Medium
21. If the current market price of corn is $100 per bushel and the nominal rate of interest is
10 percent, then the real price of corn next period should also be $100.
A) True
B)

False

Ans: A

Format: True/False
Learning Objective: LO 2
Level of Difficulty: Easy
22. A progressive tax system means that a taxpayer will pay a higher tax rate for a given
dollar of earnings for every successive year.
A) True
B)

False

Ans: B

Page 6


Format: True/False
Learning Objective: LO 2
Level of Difficulty: Easy
23. It is possible for a firm to have one depreciation schedule for tax purposes and another
for financial reporting purposes.
A) True
B)

False

Ans: A

Format: True/False
Learning Objective: LO 2
Level of Difficulty: Medium
24. The MACRS depreciation tax schedule for three-year equipment provides a
depreciation rate for a total of four years.
A) True
B)

False

Ans: A

Format: True/False
Learning Objective: LO 2
Level of Difficulty: Medium
25. Terminal-year free cash flows may differ from the cash flows provided in the typical
year of a project for reasons such as the return/repayment of increases/reductions in
additional working capital in the prior years.
A) True
B)

False

Ans: A

Format: True/False
Learning Objective: LO 2
Level of Difficulty: Medium
26. If the salvage value, at the time of an asset disposition, is less than the book value of the
asset, then the firm will effectively receive a positive cash flow from taxes on the sale.
A) True
B)

False

Page 7


Ans: A

Format: True/False
Learning Objective: LO 2
Level of Difficulty: Medium
27. The expected cash flows for a project are fixed amounts that have zero variability in the
projected values.
A) True
B)

False

Ans: B

Format: True/False
Learning Objective: LO 2
Level of Difficulty: Medium
28. The unadjusted NPV of two projects with different useful lives can be compared to
evaluate which project is the better of the two.
A) True
B)

False

Ans: B

Format: True/False
Learning Objective: LO 5
Level of Difficulty: Medium
29. You own a uranium mine, and the price of uranium is expected to increase at a rate of 3
percent per year. The cost of capital for your firm is 15 percent, and you are evaluating
whether or not to begin harvesting the element. The correct choice is to begin
harvesting immediately if the current NPV of the project is positive.
A) True
B)

False

Ans: A

Page 8


Format: True/False
Learning Objective: LO 5
Level of Difficulty: Medium
30. You own a uranium mine, and the price of uranium is expected to increase at a rate of 3
percent per year. The cost of capital for your firm is 15 percent, and you are evaluating
whether or not to begin harvesting the element. The correct choice is to begin
harvesting immediately under all circumstances.
A) True
B)

False

Ans: B

Format: Multiple Choice
Learning Objective: LO 1
Level of Difficulty: Easy
31. The cash flows used in capital budgeting calculations are based on.
A) historical estimates.
B)

forecasts of future cash revenues, expenses, and investment outlays.

C)

forecasts of net income.

D)

forecasts of retained earnings available for financing projects.

Ans: B

Format: Multiple Choice
Learning Objective: LO 2
Level of Difficulty: Easy
32. The NPV of a project is estimated by
A) discounting the expected cash flows of a project in the future.
B)

discounting only the certain cash flows of a project in the future.

C)

discounting the variance of the expected cash flows of a project in the future.

D)

none of the above.

Ans: A

Page 9


Format: Multiple Choice
Learning Objective: LO 1
Level of Difficulty: Easy
33. The ___________ is intended to reconcile changes in the balance sheet cash accounts.
A) capital budgeting cash flow calculation
B)

accounting statement of cash flows

C)

accounting statement of income

D)

none of the above

Ans: B

Format: Multiple Choice
Learning Objective: LO 1
Level of Difficulty: Easy
34. The term ___________ refers to the fact that these cash flows reflect the amount by
which the firm's total after-tax free cash flows will change if the project is adopted.
A) periodic
B)

ending cash flows

C)

incremental

D)

none of the above

Ans: C

Format: Multiple Choice
Learning Objective: LO 1
Level of Difficulty: Easy
35. _________ refers to the cash flow that a project is expected to generate after all
operating expenses and taxes have been paid.
A) Incremental cash flow from operations
B)

Operating income

C)

EBITDA

D)

None of the above

Ans: A

Page 10


Format: Multiple Choice
Learning Objective: LO 1
Level of Difficulty: Medium
36. In order to calculate free cash flow by starting with incremental cash flow from
operations, we should
A) subtract the incremental capital expenditures and add the incremental additions to
working capital.
B) add the incremental capital expenditures and the incremental additions to
working capital.
C) subtract the incremental capital expenditures and the incremental additions to
working capital.
D) None of the above.
Ans: C

Format: Multiple Choice
Learning Objective: LO 1
Level of Difficulty: Easy
37. The idea that we can evaluate the cash flows from a project independently of the cash
flows for the firm is known as
A) the stand-alone principle.
B)

the dependent principle.

C)

the independent principle.

D)

none of the above.

Ans: A

Format: Multiple Choice
Learning Objective: LO 1
Level of Difficulty: Easy
38. The firm's ____________ is used to calculate NOPAT because the profits from a project
are assumed to be incremental to the firm.
A) average tax rate
B)

marginal tax rate

C)

lowest marginal tax rate

D)

none of the above

Ans: B

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Format: Multiple Choice
Learning Objective: LO 1
Level of Difficulty: Easy
39. Additions to tangible assets, intangible assets ,and current assets can be described as
A) cash flows associated with investments.
B)

operating cash flows.

C)

free cash flows.

D)

none of the above.

Ans: A

Format: Multiple Choice
Learning Objective: LO 1
Level of Difficulty: Easy
40. The impact of a project on a firm's overall value depends on
A) a firm's accounting earnings.
B)

a firm's cash flow.

C)

a project's cash flow.

D)

none of the above.

Ans: C

Format: Multiple Choice
Learning Objective: LO 2
Level of Difficulty: Easy
41. Which of the following should not be included in a project's cash flow calculations?
A) cash expenses
B)

cash revenues

C)

allocated expenses

D)

none of the above

Ans: C

Page 12


Format: Multiple Choice
Learning Objective: LO 2
Level of Difficulty: Easy
42. Corporate overhead allocations should only be taken into account on project analysis if
A) the firm is currently covering all of its overhead allocations.
B)

the firm is currently unable to cover all of its overhead allocations.

C)

the overhead allocations involve cash expenditures.

D)

none of the above.

Ans: D

Format: Multiple Choice
Learning Objective: LO 2
Level of Difficulty: Medium
43. Brown Mack, Inc., currently has two large manufacturing divisions that share a single
plant. Brown Mack owns the plant but has calculated that $6 million of overhead
expenses should be allocated to the two equal-sized divisions. If Brown Mack starts a
third manufacturing division, of equal size to the other two divisions, then what
overhead cost should the new division take into account on its capital budgeting cash
flow analysis?
A) $0
B)

$2 million

C)

$3 million

D)

$6 million

Ans: A

Format: Multiple Choice
Learning Objective: LO 2
Level of Difficulty: Medium
44. A firm is considering taking a project that will produce $12 million of revenue per year.
Cash expenses will be $5 million, and depreciation expenses will be $1 million per
year. If the firm takes that project, then it will reduce the cash revenues of an existing
project by $2 million. What is the free cash flow on the project, per year, if the firm is
in the 40 percent marginal tax rate?
A) $2.4 million
B)

$3.4 million

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C)

$4.6 million

D)

$5.0 million

Ans: B
Feedback:
Revenue
Cash exp
Deprec exp
Lost revenue
Pretax income
Less taxes
Net income
Deprec
Free Cash Flow/yr

$12,000,000
(5,000,000)
(1,000,000)
(2,000,000)
$ 4,000,000
1,600,000
$ 2,400,000
1,000,000
$ 3,400,000

Format: Multiple Choice
Learning Objective: LO 2
Level of Difficulty: Medium
45. Whenever a project has a negative impact on an existing project's cash flows, then that
effect should
A) be ignored.
B)

be ignored if the project is evaluated using the correct cost of capital.

C)

be included as a negative revenue amount on the new project's cash flow analysis.

D)

be included if the impact is limited to noncash expenditures.

Ans: C

Format: Multiple Choice
Learning Objective: LO 2
Level of Difficulty: Medium
46. If a firm has the option of leasing some factory space to another firm or utilizing it for
another product line, then if the firm chose the product line how should it handle the
lost lease payments on the factory space?
A) Ignore it.
B)

Include it as an opportunity cost.

C)

Include half of it as additional revenue for the project.

D)

None of the above.

Page 14


Ans: B

Format: Multiple Choice
Learning Objective: LO 2
Level of Difficulty: Easy
47. Which of the following is the best example of a sunk cost?
A) Future payments on a leased building.
B)

Future research and development costs.

C)

Historical research and development costs.

D)

Historical noncash expenses.

Ans: C

Format: Multiple Choice
Learning Objective: LO 2
Level of Difficulty: Easy
48. _____________ represent dollars stated in terms of constant purchasing power.
A) Nominal dollars
B)

Real dollars

C)

Inflated dollars

D)

None of the above

Ans: B

Format: Multiple Choice
Learning Objective: LO 2
Level of Difficulty: Medium
49. If inflation is anticipated to be 10 percent during the next year while a nominal rate of
20 percent will be earned on U.S. Treasury bills, then what is the accurate real rate of
return on these securities?
A) 20.00%
B)

10.00%

C)

9.09%

D)

None of the above

Page 15


Ans: C
Feedback:
1 + k = (1 + Pe) x (1 + r)
1 + 0.2 = (1 + 0.1) x (1 + r)
1.0909 = 1 + r
0.0909 = r
Format: Multiple Choice
Learning Objective: LO 2
Level of Difficulty: Medium
50. If the real return on U.S. Treasury bills is 14 percent while the rate of expected inflation
is anticipated to be 8 percent, then what should nominal rate of return be?
A) 14.00%
B)

33.00%

C)

23.12%

D)

all of the above

Ans: C
Feedback:
1 + k = (1 + Pe) x (1 + r)
1 + k = (1 + 0.08) x (1 + 0.14)
1 + k = 1.2312
k = 0.2312
Format: Multiple Choice
Learning Objective: LO 2
Level of Difficulty: Medium
51. If you are discounting a project's cash flows using the nominal cost of capital, then that
means that you have taken the following into account:
A) the real rate of return
B)

the expected rate of inflation

C)

both of the above

D)

none of the above

Ans: C

Page 16


Format: Multiple Choice
Learning Objective: LO 2
Level of Difficulty: Medium
52. A tax system in which taxpayers pay a progressively larger share of their income in
taxes as their income rises is called
A) a flat tax system.
B)

a progressive tax system.

C)

a digressive tax system.

D)

a political tax system.

Ans: B

Format: Multiple Choice
Learning Objective: LO 2
Level of Difficulty: Medium
53. For a U.S. corporation with income above $20 million,
A) the average tax rate is less than the marginal tax rate.
B)

the average tax rate is equal to the marginal tax rate.

C)

the average tax rate is greater than the marginal tax rate.

D)

none of the above.

Ans: B

Format: Multiple Choice
Learning Objective: LO 4
Level of Difficulty: Medium
54. When compared to the straight-line depreciation method, MACRS has
A) a greater proportion of its depreciation early in the life of the asset.
B)

a lesser proportion of its depreciation early in the life of the asset.

C)

an equal proportion of its depreciation early in the life of the asset.

D)

none of the above.

Ans: A

Page 17


Format: Multiple Choice
Learning Objective: LO 4
Level of Difficulty: Medium
55. In order for a project to generate a positive net working capital cash flow at the
conclusion of a project,
A) the project must have generated a cumulative negative cash flow during the life
of the project.
B) the project must have generated a cumulative positive cash flow during the life of
the project.
C) the project must have generated a cumulative negative cash flow at the
conclusion of the project.
D) the project could not have generated a positive cash flow at the opening of the
project.
Ans: A

Format: Multiple Choice
Learning Objective: LO 4
Level of Difficulty: Medium
56. If you are deciding whether to take one project or another, where the projects have
different useful lives, then you could utilize
A) a repeated investment analysis to decide which project is better for the firm.
B)
C)

an equivalent annual annuity analysis to decide which project is better for the
firm.
either of the above.

D)

none of the above.

Ans: C

Format: Multiple Choice
Learning Objective: LO 5
Level of Difficulty: Medium
57. Windy Burgers is trying to determine when to harvest a herd of cows that it currently
owns. If it harvests the herd in year 1, the NPV of the project would increase over an
immediate harvest by 25 percent. A year 2 harvest would create an NPV increase of 15
percent over that of year 1 and year 3 would create an NPV increase of 7 percent over
that of year 2. If the cost of capital is 12 percent for Windy, then which harvest year
would maximize the NPV for the firm? Assume that all NPVs are calculated from the
perspective of today.
A) Harvest immediately.
B)

Harvest in year 1.

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C)

Harvest in year 2.

D)

Harvest in year 3.

Ans: C

Format: Multiple Choice
Learning Objective: LO 5
Level of Difficulty: Medium
58. Stillwater Drinks is trying to determine when to harvest the water from the fountain of
youth that it currently owns. If it harvests the water in year 1, the NPV of the project
would increase over an immediate harvest by 18 percent. A year 2 harvest would create
an NPV increase of 12 percent over that of year 1 and year 3 would create an NPV
increase of 8 percent over that of year 2. If the cost of capital is 17 percent for
Stillwater, then which harvest year would maximize the NPV for the firm? Assume that
all NPVs are calculated from the perspective of today.
A) Harvest immediately.
B)

Harvest in year 1.

C)

Harvest in year 2.

D)

Harvest in year 3.

Ans: B

Format: Multiple Choice
Learning Objective: LO 5
Level of Difficulty: Medium
59. The proper time to harvest an asset is when
A) the percentage NPV increase of harvesting a project at a future point in time is at
the last date where the increase is greater than the cost of capital.
B) the percentage NPV increase of harvesting a project at a future point in time is at
the first date where the increase is less than the cost of capital.
C) the percentage NPV increase of harvesting a project at a future point in time is at
the first date where the increase is greater than the cost of capital.
D) none of the above.
Ans: A

Page 19


Format: Multiple Choice
Learning Objective: LO 4
Level of Difficulty: Medium
60. Norman, Inc. is considering two mutually exclusive projects. Project A is a six-year
project with a NPV of $3,000 and Project B is a four-year project with an NPV of
$2,278. Project A has an equivalent annual cash flow of $730 and Project B has an
equivalent annual cash flow of $750. Which project should the firm select?
A) Choose Project A because it has the higher NPV.
B)

Choose Project B because it has the lower NPV.

C)

Choose Project B because it has the higher equivalent annual cash flow.

D)

Choose Project A because it has the lower equivalent annual cash flow.

Ans: C

Use the following to answer questions 61-64:
Provo, Inc., had revenues of $10 million, cash operating expenses of $5 million, and depreciation
and amortization of $1 million during 2008. The firm purchased $500,000 of equipment during
the year while increasing its inventory by $300,000 (with no corresponding increase in current
liabilities). The marginal tax rate for Provo is 40 percent.
Reference: Ref 11-1
Format: Multiple Choice
Learning Objective: LO 1
Level of Difficulty: Medium
61. Free cash flow: What is Provo's cash flow from operations for 2008?
A) $2,400,000
B)

$2,600,000

C)

$3,400,000

D)

$4,000,000

Ans: C

Page 20


Feedback:
Provo, Inc.
Revenue
- Operating Ex
EBITDA
- D&A
EBIT
x (1 – t)
NOPAT
+ D&A
CF Opns

$10,000,000
5,000,000
$ 5,000,000
1,000,000
$ 4,000,000
60%
$ 2,400,000
1,000,000
$ 3,400,000

Reference: Ref 11-1
Format: Multiple Choice
Learning Objective: LO 1
Level of Difficulty: Medium
62. Free cash flow: What is Provo's free cash flow for 2008?
A) $2,400,000
B)

$2,600,000

C)

$3,400,000

D)

$4,000,000

Ans: B
Feedback:
Provo, Inc.
Revenue
- Operating Ex
EBITDA
- D&A
EBIT
x (1 – t)
NOPAT
+ D&A
CF Opns
- Cap Exp
- Add WC
FCF

$10,000,000
5,000,000
$ 5,000,000
1,000,000
$ 4,000,000
60%
$ 2,400,000
1,000,000
$ 3,400,000
$500,000
300,000
$ 2,600,000

Page 21


Reference: Ref 11-1
Format: Multiple Choice
Learning Objective: LO 1
Level of Difficulty: Medium
63. Free cash flow: What is Provo's NOPAT for 2008?
A) $2,400,000
B)

$2,600,000

C)

$3,400,000

D)

$4,000,000

Ans: A
Feedback:
Provo, Inc.
Revenue
- Operating Ex
EBITDA
- D&A
EBIT
x (1 – t)
NOPAT

$10,000,000
5,000,000
$ 5,000,000
1,000,000
$ 4,000,000
60%
$ 2,400,000

Reference: Ref 11-1
Format: Multiple Choice
Learning Objective: LO 1
Level of Difficulty: Medium
64. Free cash flow: What is Provo's cash flows associated with investments for 2008?
A) $300,000
B)

$500,000

C)

$800,000

D)

None of the above.

Ans: C

Page 22


Use the following to answer questions 65-68:
Champagne, Inc., had revenues of $12 million, cash operating expenses of $8 million, and
depreciation and amortization of $1.5 million during 2008. The firm purchased $700,000 of
equipment during the year while increasing its inventory by $500,000 (with no corresponding
increase in current liabilities). The marginal tax rate for Champagne is 30 percent.
Reference: Ref 11-2
Format: Multiple Choice
Learning Objective: LO 1
Level of Difficulty: Medium
65. Free cash flow: What is Champagne's cash flow from operations for 2008?
A) $2,050,000
B)

$2,500,000

C)

$3,250,000

D)

$4,000,000

Ans: C
Feedback:
Champagne, Inc.
Revenue
- Operating Ex
EBITDA
- D&A
EBIT
x (1 – t)
NOPAT
+ D&A
CF Opns

$12,000,000
8,000,000
$ 4,000,000
1,500,000
$ 2,500,000
70%
$ 1,750,000
1,500,000
$ 3,250,000

Reference: Ref 11-2
Format: Multiple Choice
Learning Objective: LO 1
Level of Difficulty: Medium
66. Free cash flow: What is Champagne's free cash flow for 2008?
A) $2,050,000
B)

$2,500,000

C)

$3,250,000

D)

$4,000,000

Page 23


Ans: A
Feedback:
Champagne, Inc.
Revenue
- Operating Ex
EBITDA
- D&A
EBIT
x (1 – t)
NOPAT
+ D&A
CF Opns
- Cap Exp
- Add WC
FCF

$12,000,000
8,000,000
$ 4,000,000
1,500,000
$ 2,500,000
70%
$ 1,750,000
1,500,000
$ 3,250,000
$700,000
500,000
$ 2,050,000

Reference: Ref 11-2
Format: Multiple Choice
Learning Objective: LO 1
Level of Difficulty: Hard
67. Free cash flow: What is Champagne's NOPAT for 2008?
A) $1,750,000
B)

$2,500,000

C)

$3,250,000

D)

$4,000,000

Ans: A
Feedback:
Champagne, Inc.
Revenue
- Operating Ex
EBITDA
- D&A
EBIT
x (1 – t)
NOPAT

$12,000,000
8,000,000
$ 4,000,000
1,500,000
$ 2,500,000
70%
$ 1,750,000

Page 24


Reference: Ref 11-2
Format: Multiple Choice
Learning Objective: LO 1
Level of Difficulty: Hard
68. Free cash flow: What are Champagne's cash flows associated with investments for
2008?
A) $500,000
B)

$700,000

C)

$1,200,000

D)

None of the above.

Ans: C
Feedback:
Cash flows associated with investments equal the purchase of tangible and intangible
assets as well as increases in working capital. Therefore, the cash flows associated with
investments equal $700,000 + $500,000 = $1,200,000.
Format: Multiple Choice
Learning Objective: LO 1
Level of Difficulty: Hard
69. Marginal and average tax rates: Use the tax rate taken from Exhibit 11.6 to calculate
the total taxes paid for Lansing, Inc., this year. Lansing's pretax income was $275,000.
Exhibit 11.6 U.S. Corporate Tax Rate Schedule in 2007
Taxable Income
More
But Not More
Than
Than
Tax Owed
$0
$50,000
15% of amount beyond $0
$50,000
$75,000
$7,500 +25% of amount beyond $50,000
$75,000
$100,000
$13,750 +34% of amount beyond $75,000
$100,000
$335,000
$22,250 +39% of amount beyond $100,000
$335,000
$10,000,000
$113,900 +34% of amount beyond $335,000
$10,000,000
$15,000,000
$3,400,000 +35% of amount beyond $10,000,000
$15,000,000
$18,333,333
$5,150,000 +38% of amount beyond $15,000,000
$18,333,333
------35% on all income
A) $22,500
B)

$68,250

C)

$90,750

D)

$107,250

Ans: C

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