1. A firm is evaluting a new machine to replace an existing, older machine. the change in depreciation is $3,000. the firm's marginal tax rate is 30 percent.

a. Depreciation does not affect the calculation of the supplemental operating cash flow.

b. Depreciation is added to the net income to calculate the supplemental operating cash flow.

c. depreciation expense is added to the intial outlay incurred to purchase an asset.

d. depreciation is deducted from the terminal cash flows from an asset.

2. Which of the following is NOT among the differences between futures contracts and options contracts?

a. Futures give the obligation, while options give the right to buy or sell.

b. Futures require no premium, while options premium are required.

c. Options have the “Do not exercise” choice to get out of the contract, while futures do not.

d. You can take a short position by buying futures contracts or buying a put option.

e. All of the above are among the differences between Futures and Options contracts.