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You purchased and put in use an asset with useful life of 5 years under MACRS depreciation system. For how many years will you record depreciation expense for this asset?

The [term1] [term2] Simulation is an extension to scenario analysis in which a computer provides a distribution of possible outcomes, for example, project NPVs, based on repeated sampling from a distribution associated with one or more input variables in a decision model. (2 words, 1 point for each word, 2 points total)

Which of the following statements regarding capital investment analysis is FALSE?

The [term1] [term2] Simulation is an extension to scenario analysis in which a computer provides a distribution of possible outcomes, for example, project NPVs, based on repeated sampling from a distribution associated with one or more input variables in a decision model. (2 words, 1 point for each word, 2 points total)

Which of the following statements regarding capital investment analysis is FALSE?

If the after-tax cost of debt is 10%, what is the approximate pre-tax cost for a firm in the 40% tax bracket?

The following table relates to two capital-budgeting projects of equal risk and reports the present value of the cashflows in the relevant periods. Which of the projects has the higher Net Present Value and will be selected if Net Present Value is used as the selection criteria?

Managers’ tendency to invest in small additions that require no approval from above, rather than investing in a major capital project that would vastly improve the firm’s competitive position is called [term1]. (1 point. Hint: this is one of behavioral biases common in capital budgeting.)

An asset “Equipment 1” has a net book value of $ 19,000 at the moment of sale. What are the after-tax proceeds (i.e., after-tax cash flow) for a firm in the 27 % marginal tax bracket if this asset is sold for $ 15,000 cash?

In my lectures I showed how to conduct “What-if sensitivity” analysis in Excel looking for the changes in the results, depending on the change of a single variable at a time. In particular, the exercise included the request in Excel to calculate a certain tax rate that would change the Net Present Value from an original amount to another precisely specified amount (e.g., $ 4,000). What was the name of the function that was used to conduct this type of sensitivity analysis?