Answer the following statements true (T) or false (F)
1. To calculate the initial investment, we subtract all cash inflows occurring at time zero from all cash outflows occurring at time zero.
2. The basic cash flows that must be considered when determining the initial investment associated with a capital expenditure are the installed cost of the new asset, the after-tax proceeds (if any) from the sale of an old asset, and the change (if any) in net working capital.
3. Under MACRS depreciation, the depreciable value of an asset is equal to the asset's purchase price minus any installation costs.
4. The change in net working capital—regardless of whether an increase or decrease—is not taxable because it merely involves a net buildup or net reduction of current accounts.
5. If an investment in a new asset results in a change in current assets that exceeds the change in current liabilities, this change in net working capital represents an initial cash outflow.
1. TRUE
2. TRUE
3. FALSE
4. TRUE
5. TRUE
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