1 Net annual cash flow can be estimated by

• adding advertising expense to net income.
• deducting credit purchases from net income.
• deducting credit sales from net income.
• adding depreciation expense to net income.

2 Giraldi Company has identified that the cost of a new computer will be $48,000, but with the use of the new computer, net income will increase by $5,000 a year. If depreciation expense is $3,000 a year, the cash payback period is:

• 16.0 years.
• 9.6 years.
• 6.0 years.
• 24.0 years.

3 A project has annual income exclusive of depreciation of $80,000. The annual rate of return is 15% and annual depreciation is $20,000. There is no salvage value. The internal rate of return is 12%. The initial cost of the project was

• $1,000,000.
• $800,000.
• $400,000.
• $500,000.

4 Garza Company is considering buying equipment for $320,000 with a useful life of five years and an estimated salvage value of $16,000. If annual expected income is $28,000, the denominator in computing the annual rate of return is

• $320,000.
• $168,000.
• $336,000.
• $160,000.