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] of return is the estimated rate (i.e., percentage) that makes the discounted present value of future cash flows equal to the initial investment (2 words, 1 point for each word, up to 2 points).

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)

The [term1] [term2] of return is the estimated rate (i.e., percentage) that makes the discounted present value of future cash flows equal to the initial investment (2 words, 1 point for each word, up to 2 points).

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?

A depreciation tax [term1] is a tax reduction technique under which depreciation expense is subtracted from taxable income. This amount is calculated as the applicable tax rate, multiplied by the amount of depreciation (1 point).

A depreciation tax [term1] is a tax reduction technique under which depreciation expense is subtracted from taxable income. This amount is calculated as the applicable tax rate, multiplied by the amount of depreciation (1 point).

Repeated for your convenience: Marc Corporation wants to purchase a new machine for $400,000. Management predicts that the machine will produce cash sales of $275,000 each year for the next 5 years. Cash expenses are expected to include direct materials, direct labor, and factory overhead (excluding depreciation) totaling $80,000 per year. The company uses MACRS for depreciation. The machine is considered as a 3-year property and is not expected to have any significant residual value at the end of its useful years. Marc’s combined marginal income tax rate is 40%. Management requires a minimum after-tax rate of return of 10% on all investments. A partial MACRS depreciation table is reproduced below. What is the TOTAL after-tax cash inflow in Year 1 from the proposed investment (rounded to the nearest thousand)?