19.

When a firm sells an asset for ____, it realizes a capital gain and must pay income taxes on
it.

a. book value
b. less than book value
c. more than book value but less than original cost
*d. more than its original cost

20. ____ is the term used when the initial cost of all acceptable capital budgeting projects is gre
ater than the total funds the firm has available.

a. Profit maximization
*b. Funds constraint
c. Mutually exclusive
d. Contingent

21. In estimating the net investment, an outlay that has already been made is known as a(n) ____.

*a. sunk cost

b. cash outflow
c. opportunity cost
d. expansion cost

22. Depreciation is based on the asset cost plus all of the following EXCEPT ____.

a. shipping costs
*b. increase in inventory
c. installation
d. cost of attached equipment acquired at the same time

23. Depreciation ____ reported profits and it ____ taxes paid by a firm.

a. increases; reduces
*b. reduces; reduces
c. reduces; increases
d. increases; increases