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1. Which of the following cash flows are NOT considered in the calculation of the initial outlay for a capital investment proposal?

Cost of Installing new equipment

Increase in net working capital requirements

Sunk costs

After-tax salvage value of old equipment

All of the above should be considered

2. An? auto-parts company is deciding whether to sponsor a racing team for a cost of? $1 million. The sponsorship would last for three years and is expected to increase cash flows by $550,000 per year. If the discount rate is 7.6?%, what will be the change in the value of the company if it chooses to go ahead with the? sponsorship?

A. $727,084

B. $641,544

C. $684,314

D. $427,696

Financial Management, Finance

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