CorporateFinanceBerkDeMarzoTestBankChapter

CorporateFinance,3e(Berk/DeMarzo)Chapter8FundamentalsofCapitalBudgetingForecastingEarnings1)WhichofthefollowingstatementsisFALSEA)Acapitalbudgetliststheprojectsandinvestmentsthatacompanyplanstoundertakeduringthecomingyear.B)IncomeTax=EBIT×(1-τc).C)Whensalesofanewproductdisplacesalesofanexistingproduct,thesituationisoftenreferredtoascannibalization.D)Overheadexpensesareoftenallocatedtothedifferentbusinessactivitiesforaccountingpurposes.Answer:BDiff:1Section:ForecastingEarningsSkill:Conceptual2)WhichofthefollowingstatementsisFALSEA)Saleswillultimatelydeclineastheproductnearsobsolescenceorfacesincreasedcompetition.B)ManagerssometimescontinuetoinvestinaprojectthathasanegativeNPVbecausetheyhavealreadyinvestedalargeamountintheprojectandfeelthatbynotcontinuingit,thepriorinvestmentwillwasted.C)Withstraight-linedepreciationtheasset'scostisdividedequallyoveritslife.D)Aprojectsunleverednetincomeisequaltoitsincrementalrevenueslesscostsanddepreciation,evaluatedonanpre-taxbasis.Answer:DDiff:1Section:ForecastingEarningsSkill:Conceptual3)WhichofthefollowingstatementsisFALSEA)Webeginthecapitalbudgetingprocessbydeterminingtheincrementalearningsofaproject.B)Themarginalcorporatetaxrateisthetaxratethefirmwillpayonanincrementaldollarofpre-taxincome.C)Investmentsinplant,property,andequipmentaredirectlylistedasexpensewhencalculatingearnings.D)Theopportunitycostofusingaresourceisthevalueitcouldhaveprovidedinitsbestalternativeuse.Answer:CDiff:1Section:ForecastingEarningsSkill:Conceptual4)WhichofthefollowingstatementsisFALSEA)Whenevaluatingacapitalbudgetingdecision,thecorrecttaxratetouseisthefirm'saveragecorporatetaxrate.B)Todeterminethecapitalbudget,firmsanalyzealternativeprojectsanddecidewhichonestoacceptthroughaprocesscalledcapitalbudgeting.C)Anewproducttypicallyhaslowersalesinitially,ascustomersgraduallybecomeawareoftheproduct.D)Sunkcostshavebeenorwillbepaidregardlessofthedecisionwhetherornottoproceedwiththeproject.Answer:ADiff:2Section:ForecastingEarningsSkill:Conceptual5)WhichofthefollowingstatementsisFALSEA)Becausevalueislostwhenaresourceisusedbyanotherproject,weshouldincludetheopportunitycostasanincrementalcostoftheproject.B)Sunkcostsareincrementalwithrespecttothecurrentdecisionregardingtheprojectandshouldbeincludedinitsanalysis.C)Overheadexpensesareassociatedwithactivitiesthatarenotdirectlyattributabletoasinglebusinessactivitybutinsteadaffectmanydifferentareasofthecorporation.D)Whencomputingtheincrementalearningsofaninvestmentdecision,weshouldincludeallchangesbetweenthefirm'searningswiththeprojectversuswithouttheproject.Answer:BDiff:2Section:ForecastingEarningsSkill:Conceptual6)WhichofthefollowingstatementsisFALSEA)Thefirmdeductsafractionoftheinvestmentsinplant,property,andequipmenteachyearasdepreciation.B)Ifsecuritiesarefairlypriced,thenetpresentvalueofafixedsetofcashflowsisindependentofhowthosecashflowsarefinanced.C)Sunkcostfallacyisatermusedtodescribethetendencyofpeopletoignoresunkcostsincapitalbudgetinganalysis.D)Agoodruletorememberisthatifourdecisiondoesnotaffectacashflowthenthecashflowshouldnotaffectourdecision.Answer:CDiff:2Section:ForecastingEarningsSkill:Conceptual7)WhichofthefollowingstatementsisFALSEA)Theultimategoalincapitalbudgetingistodeterminetheeffectofthedecisiontotakeaparticularprojectonthefirm'scashflows.B)Totheextentthatoverheadcostsarefixedandwillbeincurredinanycase,theyareincrementaltotheprojectandshouldbeincludedinthecapitalbudgetinganalysis.C)UnleveredNetIncome=(Revenue-Costs-Depreciation)×(1-τc).D)Earningsarenotcashflows.Answer:BDiff:2Section:ForecastingEarningsSkill:Conceptual8)WhichofthefollowingstatementsisFALSEA)Projectexternalitiesaredirecteffectsoftheprojectthatmayincreaseofdecreasetheprofitsofotherbusinessactivitiesofthefirm.B)Incrementalearningsaretheamountbywhichthefirm'searningsareexpectedtochangeasaresultoftheinvestmentdecision.C)Theaveragesellingpriceofaproductanditscostofproductionwillgenerallychangeovertime.D)Anymoneythathasalreadybeenspentisasunkcostandthereforeirrelevantinthecapitalbudgetingprocess.Answer:ADiff:3Section:ForecastingEarningsSkill:Conceptual9)WhichofthefollowingstatementsisFALSEA)Manyprojectsusearesourcethatthecompanyalreadyowns.B)Whenevaluatingacapitalbudgetingdecision,wegenerallyincludeinterestexpense.C)Onlyincludeasincrementalexpensesinyourcapitalbudgetinganalysistheadditionaloverheadexpensesthatarisebecauseofthedecisiontotakeontheproject.D)Asapracticalmatter,toderivetheforecastedcashflowsofaproject,financialmanagersoftenbeginbyforecastingearnings.Answer:BDiff:2Section:ForecastingEarningsSkill:Conceptual10)WhichofthefollowingstatementsisFALSEA)Thesimplestmethodusedtocalculatedepreciationisthestraight-linemethod.B)Asunkcostisanyunrecoverablecostforwhichthefirmisalreadyliable.C)UnleveredNetIncome=EBIT×τc.D)Thedecisiontocontinueorabandonshouldbebasedonlyontheincrementalcostsandbenefitsoftheprojectgoingforward.Answer:CDiff:1Section:ForecastingEarningsSkill:Conceptual11)WhichofthefollowingcostswouldyouconsiderwhenmakingacapitalbudgetingdecisionA)SunkcostB)OpportunitycostC)InterestexpenseD)FixedoverheadcostAnswer:BDiff:1Section:ForecastingEarningsSkill:Conceptual12)Adecreaseinthesalesofacurrentprojectbecauseofthelaunchingofanewprojectis:A)cannibalization.B)asunkcost.C)anoverheadexpense.D)irrelevanttotheinvestmentdecision.Answer:ADiff:1Section:ForecastingEarningsSkill:Definition13)Moneythathasbeenorwillbepaidregardlessofthedecisionwhetherornottoproceedwiththeprojectis:A)cannibalization.B)consideredaspartoftheinitialinvestmentintheproject.C)anopportunitycost.D)asunkcost.Answer:DDiff:1Section:ForecastingEarningsSkill:Definition14)Thevalueofcurrentlyunusedwarehousespacethatwillbeusedaspartofanewcapitalbudgetingprojectis:A)anopportunitycost.B)irrelevanttotheinvestmentdecision.C)anoverheadexpense.D)asunkcost.Answer:ADiff:1Section:ForecastingEarningsSkill:DefinitionUsetheinformationforthequestion(s)below.FordMotorCompanyisconsideringlaunchinganewlineofPlug-inElectricSUVs.TheheavyadvertisingexpensesassociatedwiththenewSUVlaunchwouldgenerateoperatinglossesof$35millionnextyear.WithoutthenewSUV,Fordexpectstoearnpre-taxincomeof$80millionfromoperationsnextyear.Fordpaysa30%taxrateonitspre-taxincome.15)TheamountthatFordMotorCompanyoweintaxesnextyearwithoutthelaunchofthenewSUVisclosestto:A)$millionB)$millionC)$millionD)$millionAnswer:AExplanation:A)=$80×.30=$24millionDiff:1Section:ForecastingEarningsSkill:Analytical16)TheamountthatFordMotorCompanyoweintaxesnextyearwiththelaunchofthenewSUVisclosestto:A)$millionB)$millionC)$millionD)$millionAnswer:AExplanation:A)=(80-35)×.30=millionDiff:1Section:ForecastingEarningsSkill:AnalyticalUsetheinformationforthequestion(s)below.FoodForLess(FFL),agrocerystore,isconsideringofferingonehourphotodevelopingintheirstore.Thefirmexpectsthatsalesfromthenewonehourmachinewillbe$150,000peryear.FFLcurrentlyoffersovernightfilmprocessingwithannualsalesof$100,000.Whilemanyoftheonehourphotosaleswillbetonewcustomers,FFLestimatesthat60%oftheircurrentovernightphotocustomerswillswitchandusetheonehourservice.17)Thelevelofincrementalsalesassociatedwithintroducingthenewonehourphotoserviceisclosestto:A)$90,000B)$150,000C)$60,000D)$120,000Answer:AExplanation:A)=$150,000-(cannibalizedsales)=150000-.60×100,000=$90,000Diff:2Section:ForecastingEarningsSkill:Analytical18)Supposethatofthe60%ofFFL'scurrentovernightphotocustomers,halfwouldstarttakingtheirfilmtoacompetitorthatoffersonehourphotoprocessingifFFLfailstooffertheonehourservice.Thelevelofincrementalsalesinthiscaseisclosestto:A)$60,000B)$150,000C)$90,000D)$120,000Answer:DExplanation:D)=$150,000-(cannibalizedsales)=150000-(.60×.50)×100,000=$120,000Notethattherateofcannibalizationisonly30%(.60×.50)sincetheother30%wouldhavetakentheirfilmelsewhere.Diff:2Section:ForecastingEarningsSkill:AnalyticalUsetheinformationforthequestion(s)below.GlucoseScanIncorporated(GSI)currentlysellsitslatestglucosemonitor,theGlucoscan3000,todiabeticpatientsfor$129.GSIplansonloweringtheirpricenextyearto$99perunit.ThecostofgoodssoldforeachGlucoscanunitis$50,andGSIexpectstosell100,000unitsoverthenextyear.19)SupposethatifGSIdropsthepriceontheGlucoscan3000immediately,itcanincreasesalesoverthenextyearby30%to130,000units.TheincrementalimpactofthispricedroponthefirmsEBITisclosestto:A)adeclineofmillion.B)anincreaseofmillion.C)adeclineofmillion.D)anincreaseofmillion.Answer:AExplanation:A)Withoutpricecut=100,000units×($129-50)=$7,900,000Withpricecut=130,000units×($99-50)=$6,370,000So,incremental=6,370,000-7,900,000=-1,530,000Diff:2Section:ForecastingEarningsSkill:Analytical20)SupposethatifGSIdropsthepriceontheGlucoscan3000immediately,itcanincreasesalesoverthenextyearby30%to130,000units.AlsosupposethatforeachGlucoscanmonitorsold,GSIexpectsadditionalsalesof$100peryearonglucosetestingstripsandthesestripshaveagrossprofitmarginof75%.Consideringtheincreaseinthesaleoftestingstrips,theincrementalimpactofthispricedroponthefirmsEBITisclosestto:A)adeclineofmillion.B)adeclineofmillion.C)anincreaseofmillion.D)anincreaseofmillion.Answer:CExplanation:C)WithoutPriceCutMonitorsales=100,000×($129-$50)=$7,900,000Stripsales=100,000×($100-$25)=$7,500,000TotalEBIT=7,900,000+7,500,000=15,400,000WithPriceCutMonitorsales=130,000×($99-$50)=$6,Stripsales=130,000×($100-$25)=$9,750,000TotalEBIT=6,370,000+9,750,000=16,120,000Incremental=16,120,000-15,400,000=720,000Diff:3Section:ForecastingEarningsSkill:AnalyticalUsetheinformationforthequestion(s)below.TheSisypheanCorporationisconsideringinvestinginanewcanemanufacturingmachinethathasanestimatedlifeofthreeyears.Thecostofthemachineis$30,000andthemachinewillbedepreciatedstraightlineoveritsthree-yearlifetoaresidualvalueof$0.Thecanemanufacturingmachinewillresultinsalesof2,000canesinyear1.Salesareestimatedtogrowby10%peryeareachyearthroughyearthree.ThepricepercanethatSisypheanwillchargeitscustomersis$18eachandistoremainconstant.Thecaneshaveacostperunittomanufactureof$9each.Installationofthemachineandtheresultingincreaseinmanufacturingcapacitywillrequireanincreaseinvariousnetworkingcapitalaccounts.ItisestimatedthattheSisypheanCorporationneedstohold2%ofitsannualsalesincash,4%ofitsannualsalesinaccountsreceivable,9%ofitsannualsalesininventory,and6%ofitsannualsalesinaccountspayable.Thefirmisinthe35%taxbracket,andhasacostofcapitalof10%.21)TheincrementalEBITinthefirstyearfortheSisypheanCorporation'sprojectisclosestto:A)$18,000B)$8,000C)$11,700D)$5,200Answer:BExplanation:B)IncrementalEarningsForecastYear123Units2,0002,2002,420Sales(units×$18)36,00039,60043,560CostofGoodSold(units×$9)18,00019,80021,780GrossProfit18,00019,80021,780Depreciation($30,000/3)10,00010,00010,000EBIT8,0009,80011,780Incometaxat35%2,8003,4304,123Unleverednetincome5,2006,3707,657Diff:3Section:ForecastingEarningsSkill:Analytical22)TheincrementalunleverednetincomeinthefirstyearfortheSisypheanCorporation'sprojectisclosestto:A)$8,000B)$18,000C)$5,200D)$11,700Answer:CExplanation:C)IncrementalEarningsForecastYear123Units2,0002,2002,420Sales(units×$18)36,00039,60043,560CostofGoodSold(units×$9)18,00019,80021,780GrossProfit18,00019,80021,780Depreciation($30,000/3)10,00010,00010,000EBIT8,0009,80011,780Incometaxat35%2,8003,4304,123Unleverednetincome5,2006,3707,657Diff:3Section:ForecastingEarningsSkill:Analytical23)ThedepreciationtaxshieldfortheSisypheanCorporation'sprojectinthefirstyearisclosestto:A)$8,000B)$3,500C)$2,800D)$5,200Answer:BExplanation:B)Depreciationtaxshield=depreciation×τc=(30000/3)×.35=$3,500Diff:2Section:ForecastingEarningsSkill:Analytical24)TheamountofincrementalincometaxesthattheSisypheanCompanywillpayinthefirstyearonthisnewprojectisclosestto:A)$6,300B)$5,200C)$3,500D)$2,800Answer:DExplanation:D)IncrementalEarningsForecastYear123Units2,0002,2002,420Sales(units×$18)36,00039,60043,560CostofGoodSold(units×$9)18,00019,80021,780GrossProfit18,00019,80021,780Depreciation($30,000/3)10,00010,00010,000EBIT8,0009,80011,780Incometaxat35%2,8003,4304,123Unleverednetincome5,2006,3707,657Diff:2Section:ForecastingEarningsSkill:Analytical25)WhatisasunkcostShoulditbeincludedintheincrementalcashflowsforaprojectWhyorwhynotAnswer:Asunkcostisanyunrecoverablecostforwhichthefirmisalreadyliable.Sunkcostswillhavetobepaidregardlessofthedecisionwhetherornottoproceedwiththeproject.Therefore,sunkcostsarenotincrementalwithrespecttothecurrentdecisionregardingtheprojectandshouldnotbeincludedinitsanalysis.Diff:2Section:ForecastingEarningsSkill:Conceptual26)WhatisanopportunitycostShoulditbeincludedintheincrementalcashflowsforaprojectWhyorwhynotAnswer:Manyprojectsuseresourcesthatthecompanyalreadyowns.Anopportunitycostisthecostofusingaresourcethatotherwisecouldhaveprovidedvaluetothefirm.Theopportunitycostofusingaresourceisthevalueitcouldhaveprovidedinitsbestalternativeuse.Becausethisvalueislostwhenaresourceisusedbyanotherproject,weshouldalwaysincludetheopportunitycostasanincrementalcostoftheproject.Diff:2Section:ForecastingEarningsSkill:ConceptualUsetheinformationforthequestion(s)below.TheSisypheanCorporationisconsideringinvestinginanewcanemanufacturingmachinethathasanestimatedlifeofthreeyears.Thecostofthemachineis$30,000andthemachinewillbedepreciatedstraightlineoveritsthree-yearlifetoaresidualvalueof$0.Thecanemanufacturingmachinewillresultinsalesof2,000canesinyear1.Salesareestimatedtogrowby10%peryeareachyearthroughyearthree.ThepricepercanethatSisypheanwillchargeitscustomersis$18eachandistoremainconstant.Thecaneshaveacostperunittomanufactureof$9each.Installationofthemachineandtheresultingincreaseinmanufacturingcapacitywillrequireanincreaseinvariousnetworkingcapitalaccounts.ItisestimatedthattheSisypheanCorporationneedstohold2%ofitsannualsalesincash,4%ofitsannualsalesinaccountsreceivable,9%ofitsannualsalesininventory,and6%ofitsannualsalesinaccountspayable.Thefirmisinthe35%taxbracket,andhasacostofcapitalof10%.27)ConstructasimpleincomestatementshowingtheincrementalEBITandtheincrementalunleverednetincomeforallthreeyearsoftheSisypheanCompaniesproject.Answer:IncrementalEarningsForecastYear123Units2,0002,2002,420Sales(units×$18)36,00039,60043,560CostofGoodSold(units×$9)18,00019,80021,780GrossProfit18,00019,80021,780Depreciation($30,000/3)10,00010,00010,000EBIT8,0009,80011,780Incometaxat35%2,8003,4304,123Unleverednetincome5,2006,3707,657Diff:3Section:ForecastingEarningsSkill:AnalyticalDeterminingFreeCashFlowandNPV1)WhichofthefollowingstatementsisFALSEA)Depreciationisnotacashexpensepaidbythefirm.B)NetWorkingCapital=Cash+Inventory+Payables-Receivables.C)Since1997,companiescan"carryback"lossesfortwoyearsand"carryforward"lossesfor20years.D)Earningsdonotrepresentrealprofits.Answer:BDiff:2Section:DeterminingFreeCashFlowandNPVSkill:Conceptual2)WhichofthefollowingquestionsisFALSEA)NetWorkingCapital=CurrentAssets-CurrentLiabilities.B)Becausedepreciationisnotacashflow,wedonotincludeitinthecashflowforecast.C)Taxlosscarrybacksallowcorporationstotakelossesduringthecurrentyearandusethemtooffsetincomeinfutureyears.D)Earningsareanaccountingmeasureoffirmperformance.Answer:CDiff:1Section:DeterminingFreeCashFlowandNPVSkill:Conceptual3)WhichofthefollowingstatementsisFALSEA)Depreciationisamethodusedforaccountingandtaxpurposestoallocatetheoriginalpurchasecostoftheassetoveritslife.B)Sometimesthefirmexplicitlyforecastfreecashflowoverashorterhorizonthanthefullhorizonoftheprojectorinvestment.C)Earningsincludethecostofcapitalinvestments,butdonotincludenon-cashcharges,suchasdepreciation.D)Firmsoftenreportadifferentdepreciationexpenseforaccountingandfortaxpurposes.Answer:CDiff:1Section:DeterminingFreeCashFlowandNPVSkill:Conceptual4)WhichofthefollowingstatementsisFALSEA)Mostprojectswillrequirethefirmtoinvestinnetworkingcapital.B)Themaincomponentsofnetworkingcapitalarecash,inventory,receivables,andproperty,plantandequipment.C)ΔNWCt=NWCt-NWCt-1.D)Inthefinalyearofaproject,thefirmultimatelyrecoverstheinvestmentinnetworkingcapital.Answer:BDiff:1Section:DeterminingFreeCashFlowandNPVSkill:Conceptual5)WhichofthefollowingstatementsisFALSEA)Depreciationexpenseshaveapositiveimpactonfreecashflow.B)FreeCashFlow=(Revenues-Costs-Depreciation)×(1-τc)-CapitalExpenditures-ΔNWC+τc×Depreciation.C)Thefirmcannotuseitsearningstobuygoods,payemployees,fundnewinvestments,orpaydividendstoshareholders.D)Thedepreciationtaxshieldisthetaxsavingsthatresultsfromtheabilitytodeductdepreciation.Answer:BDiff:2Section:DeterminingFreeCashFlowandNPVSkill:Conceptual6)WhichofthefollowingstatementsisFALSEA)Becauseonlythetaxconsequencesofdepreciationarerelevantforfreecashflow,weshouldusethedepreciationexpensethatthefirmwillusefortaxpurposedinourfreecashflowforecasts.B)Afirmgenerallyidentifiesitsmarginaltaxratebydeterminingthetaxbracketthatitfallsintobasedonitsoveralllevelofpre-taxincome.C)FreeCashFlow=(Revenues-Costs)×(1-τc)-CapitalExpenditures-ΔNWC+τc×Depreciation.D)Networkingcapitalisthedifferencebetweencurrentliabilitiesandcurrentassets.Answer:DDiff:2Section:DeterminingFreeCashFlowandNPVSkill:Conceptual7)WhichofthefollowingstatementsisFALSEA)Theterminalofcontinuationvalueoftheprojectrepresentsthemarketvalue(asofthelastforecastperiod)ofthefreecashflowfromtheprojectatallfuturedates.B)Theincrementaleffectofaprojectonthefirm'savailablecashistheproject'sfreecashflow.C)(1-τc)×Depreciationiscalledthedepreciationtaxshield.D)Toevaluateacapitalbudgetingdecision,wemustdetermineitsconsequencesforthefirm'savailablecash.Answer:CDiff:2Section:DeterminingFreeCashFlowandNPVSkill:Conceptual8)WhichofthefollowingcashflowsarerelevantincrementalcashflowsforaprojectthatyouarecurrentlyconsideringinvestinginA)Thetaxsavingsbroughtaboutbytheproject'sdepreciationexpenseB)ThecostofamarketingsurveyyouconductedtodeterminedemandfortheproposedprojectC)InterestpaymentsondebtusedtofinancetheprojectD)ResearchandDevelopmentexpendituresyouhavemadeAnswer:ADiff:2Section:DeterminingFreeCashFlowandNPVSkill:Conceptual9)Yourfirmisconsideringbuildinganewofficecomplex.Yourfirmalreadyownslandsuitableforthenewcomplex.Thecurrentbookvalueofthelandis$100,000,howeveracommercialrealestateagainhasinformedyouthatanoutsidebuyerisinterestedinpurchasingthislandandwouldbewillingtopay$650,000forit.WhencalculatingtheNPVofyournewofficecomplex,ignoringtaxes,theappropriateincrementalcashflowfortheuseofthislandis:A)$650,000B)$0C)$100,000D)$750,000Answer:AExplanation:A)Itisappropriatetousethemarketvalue.Iftaxesareinclude,thevaluewouldbetheafter-taxvalueoftheland.Diff:2Section:DeterminingFreeCashFlowandNPVSkill:Definition10)Youareconsideringaddingamicrobreweryontooneofyourfirm'sexistingrestaurants.Thiswillentailanincreaseininventoryof$8,000,anincreaseinAccountspayableof$2,500,andanincreaseinproperty,plant,andequipmentof$40,000.Allotheraccountswillremainunchanged.Thechangeinnetworkingcapitalresultingfromtheadditionofthemicrobreweryis:A)$45,500B)$10,500C)$6,500D)$5,500Answer:DExplanation:D)NWC=CA-CL=$8000-$2500=$5500Diff:1Section:DeterminingFreeCashFlowandNPVSkill:Analytical11)Youareconsideringaddingamicrobreweryontooneofyourfirm'sexistingrestaurants.Thiswillentailaninvestmentof$40,000innewequipment.Thisequipmentwillbedepreciatedstraightlineoverfiveyears.Ifyourfirm'smarginalcorporatetaxrateis35%,thenwhatisthevalueofthemicrobrewery'sdepreciationtaxshieldinthefirstyearofoperationA)$2,800B)$14,000C)$5,200D)$26,000Answer:AExplanation:A)Firstfigureoutthestraightlinedepreciation.$40,000/5years=$8000depreciationperyear.Then.35×$8000=$2,800depreciationtaxshieldperyear.Diff:2Section:DeterminingFreeCashFlowandNPVSkill:Analytical12)TheSisypheanCompanyisconsideringanewprojectthatwillhaveanannualdepreciationexpenseof$million.IfSisyphean'smarginalcorporatetaxrateis40%andtheiraveragecorporatetaxrateis30%,thenwhatisthevalueofthedepreciationtaxshieldontheirnewprojectA)$750,000B)$1,000,000C)$1,500,000D)$1,750,000Answer:BExplanation:B)Hereweneedtousethemarginaltaxrate.Sodepreciationtaxshield=$2,500,000×.40=$1millionDiff:2Section:DeterminingFreeCashFlowandNPVSkill:AnalyticalUsetheinformationforthequestion(s)below.TheSisypheanCorporationisconsideringinvestinginanewcanemanufacturingmachinethathasanestimatedlifeoft