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