1. The relevant cash outflows that occur only at the start of a project's life and included in the capital budgeting decisions are part of _____.

a. externalities

b. the opportunity costs of the project

c. the sunk costs of the project

d. the feasibility study cost of the project

e. the initial investment outlay of the project

2. You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck for $260,000. The truck falls into the MACRS 3-year class, and it will be sold after 3 years for $26,000. Use of the truck will require an increase in NWC (spare parts inventory) of $5,600. The truck will have no effect on revenues, but it is expected to save the firm $120,000 per year in before-tax operating costs, mainly labor. The firm's marginal tax rate is 35 percent. What will the cash flows for this project be during year 2?

A. 114,400

B. 4,430

C. 193,570

D. 118,449