Multiple Choice
Identify the letter of the choice that best
completes the statement or answers the question.
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1.
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In a capital expansion project of similar risk, it is more difficult
to: a. | Calculate the net
investment amount | b. | Calculate the CCA
values | c. | Determine the cost of capital | d. | Estimate the net
operating cash flows | | |
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2.
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Canadian Hydro is determining in which of three possible locations they
should build a new nuclear reactor. This is an example of: a. | Contingent
projects | b. | Mutually exclusive project | c. | Replacement
project | d. | Independent project | | |
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3.
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Moose Hardware purchased a new cash register system in March for
$12,000. The Capital Cost Allowance rate is 20%. How much should the company record as
depreciation on the new cash register system if the year-end is December
31st? a. | $ 1,200 | b. | $
1,600 | c. | $ 2,400 | d. | $12,000 | | |
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4.
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Beaver Burger has borrowed $500,000 at an annual rate of 10% to open a
new restaurant. Net cash flow estimates should: a. | Include the
interest charges as they would not have been able to open the restaurant without the
loan | b. | Exclude the interest charges as they are already taken into consideration in the cost
of capital | c. | Include the interest charges as they are an interest expense that is
tax-deductible | d. | Exclude the interest charges if they are higher than the cost of
capital | | |
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5.
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The estimation of cash flows from a capital project should
NOT: a. | Be measured on an
incremental basis | b. | Take into
consideration taxes | c. | Include
opportunity costs | d. | Include sunk
costs | | |
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