Question1: Your Company is considering building a new office complex. Your company already owns land suitable for the new complex. The current book value of the land is dollar 100,000, however a commercial real estate again has informed you that an outside buyer is interested in purchasing this land & would be willing to pay $650,000 for it. When computing the NPV of your new office complex, ignoring taxes, the appropriate incremental cash flow for the use of this land is:
[A] $100,000
[B] $750,000
[C] $650,000
[D] $0
Question2: You are thinking adding a micro brewery on to one of your company’s existing restaurants. This will entail an increase in inventory of $8,000, and rise in accounts payables of $2,500, & an increase in property, plant, & equipment of dollar 40,000. All other accounts will remain unchanged. The change in net working capital resulting from the addition of the micro brewery is:
[A] $6,500
[B] $5,500
[C] $45,500
[D] $10,500
Question3: Determine which of the following cash flows are relevant incremental cash flows for a project that you are currently considering investing in?
[A] Interest payments on debt used to finance the project.
[B] Research and Development expenditures you have made.
[C] The tax savings brought about by the projects depreciation expense.
[D] The cost of a marketing survey you conducted to determine demand for the proposed project.