1. If a sale of old equipment results in a loss, the loss is magnified (made larger) by the tax impact of the loss.

a) True

b) False

2. Because the purchase price of old equipment is a sunk cost, the sale of that equipment should have no impact on a capital budgeting analysis.

a)True

b) False

3. In order to start a new product line, inventories must be built up. This increase entails a cash outflow that should be included in a capital budgeting analysis.

a) True

b) False

4. In anticipation of, but prior to, the introduction of a new product line, a feasibility study was contracted and paid for. The cost of this study should be included in a capital budgeting analysis.

a) True

b) False