1.On January 1, 2016 Crane Company will acquire a new asset thatcosts $400,000 and that is anticipated to have a salvage value of$30,000 at the end of four years. The new asset:

• qualifies as three-year property under the Modified AcceleratedCost Recovery System (MACRS)
• will replace an old asset that currently has a tax basis of$80,000 and that can be sold on this date for $60,000
• will continue to generate the same operating revenues as the oldasset ($200,000 per year). However, it is predicted that savings incash operating costs will be experienced as follows: a total of$120,000 in each of the first three years, and $90,000 in thefourth year.

Crane is subject to a combined income tax rate of 40% and roundsall computations to the nearest dollar. Crane's fiscal yearcoincides with the calendar year. Assume that any gain or lossaffects the taxes paid at the end of the year in which the gain orloss occurs. The company uses the net present value (NPV) method toanalyze projects using the factors and rates presented below (basedon a discount rate of 14%):

Period	PV of $1 at 14%	PV of $1 Annuity at 14%	MACRS
1	0.88	0.88	33%
2	0.77	1.65	45
3	0.68	2.33	15
4	0.59	2.92	7

The relevant discounted operating cash flows (cost savings) thatshould be factored into Crane Company's analysis are:

Select one:

a. $133,080

b. $150,780

c. $199,620

d. $206,640

e. $550,020

2.The internal rate of return (IRR) is the

Select one:

a. Rate of interest that equates the present value of after-taxcash outflows and the present value of after-tax cash inflowsassociated with a given project

b. Minimum acceptable rate of return for a proposedinvestment.

c. Risk-adjusted rate of return.

d. Required rate of return.

e. Weighted-average rate of return generated by internallygenerated funds.

3.There is always a current tax deduction for the firm for whichof the following types of compensation?

Select one:

a. Qualified stock options

b. Nonqualified stock options

c. Deferred bonus

d. Current bonus

e. Performance shares