CFIN Final Study Guide Exam Questions And
100% Verified Answers
When a company sells its shares or bonds directly to investors without the involvement
of any intermediary or financial institution, the process is referred to as a _____. -
ANSWER Negotiated deal
The Union Atlantic Corporation is considering a capital budgeting project, and the
required return to the union is 14 percent. The first cash outflow is $170,000; at the end
of each of the next four years, the cash inflow will be $60,750. Based on these facts,
which one of the following statements is true? ANSWER The project should be
undertaken because its net present value is positive.
If the NPV of a project is positive, it means that: - ANSWER Accepting the project
increases the value of the firm
An insurance company agrees to pay you $3,310 at the end of 20 years if you pay a
premium of $100 per year at the end of each of the 20 years. Find the internal rate of
return to the nearest whole percent. - ANSWER 5%
When evaluating a new project, a firm should consider _____, as an incremental cash
flow occurs only at the start of a project's life. - ANSWER Initial investment outlay
Hill Top Lumber Company is considering building a sawmill in the state of Washington
because the company doesn't have such a facility to service its growing customer base
that is located on the west coast. Hill Top's executives believe that future growth in west
coast customers will make the sawmill project a good investment. When evaluating the
acceptability of the project, which of the following would be considered a relevant cash
flow that should be included when determining its initial investment outlay? - ANSWER It
will cost 3 million to clear the land on which Hill Top was built on
When calculating the cash flows related to a capital budgeting project, shipping and
, installation costs related to the purchase of an asset, like a lathe, are part of the: -
ANSWER Initial investment outlay
A project which has more corporate risk than the average will also have: - ANSWER
More beta risk
One of the distinctions between capital budgeting for domestic versus foreign
operations is that the: - ANSWER Cash flows for foreign operations are subject to future
exchanges
Cash Conversion Cycle - ANSWER The average length of time between the purchase of
inventory and the collection of accounts receivable
Balance Sheet - ANSWER A financial statement that presents assets, liabilities, and
owner's equity as of a specific date.
Coupon Rate - ANSWER the interest rate that a bond issuer will pay to a bondholder
Discount Rate - ANSWER The interest rate on the loans that the Fed makes to banks
Generally Accepted Accounting Principles (GAAP) - ANSWER an accepted set of
guidelines and practices for companies reporting financial information and for the
accounting profession
International Accounting Standards Board (IASB) - ANSWER The organization
responsible for evaluating, setting, or modifying GAAP in many countries outside the
USA. 15 members, 9 countries.
Investment Opportunity Schedule - ANSWER Collection of possible risk-return
combinations available from portfolios of individual assets.
100% Verified Answers
When a company sells its shares or bonds directly to investors without the involvement
of any intermediary or financial institution, the process is referred to as a _____. -
ANSWER Negotiated deal
The Union Atlantic Corporation is considering a capital budgeting project, and the
required return to the union is 14 percent. The first cash outflow is $170,000; at the end
of each of the next four years, the cash inflow will be $60,750. Based on these facts,
which one of the following statements is true? ANSWER The project should be
undertaken because its net present value is positive.
If the NPV of a project is positive, it means that: - ANSWER Accepting the project
increases the value of the firm
An insurance company agrees to pay you $3,310 at the end of 20 years if you pay a
premium of $100 per year at the end of each of the 20 years. Find the internal rate of
return to the nearest whole percent. - ANSWER 5%
When evaluating a new project, a firm should consider _____, as an incremental cash
flow occurs only at the start of a project's life. - ANSWER Initial investment outlay
Hill Top Lumber Company is considering building a sawmill in the state of Washington
because the company doesn't have such a facility to service its growing customer base
that is located on the west coast. Hill Top's executives believe that future growth in west
coast customers will make the sawmill project a good investment. When evaluating the
acceptability of the project, which of the following would be considered a relevant cash
flow that should be included when determining its initial investment outlay? - ANSWER It
will cost 3 million to clear the land on which Hill Top was built on
When calculating the cash flows related to a capital budgeting project, shipping and
, installation costs related to the purchase of an asset, like a lathe, are part of the: -
ANSWER Initial investment outlay
A project which has more corporate risk than the average will also have: - ANSWER
More beta risk
One of the distinctions between capital budgeting for domestic versus foreign
operations is that the: - ANSWER Cash flows for foreign operations are subject to future
exchanges
Cash Conversion Cycle - ANSWER The average length of time between the purchase of
inventory and the collection of accounts receivable
Balance Sheet - ANSWER A financial statement that presents assets, liabilities, and
owner's equity as of a specific date.
Coupon Rate - ANSWER the interest rate that a bond issuer will pay to a bondholder
Discount Rate - ANSWER The interest rate on the loans that the Fed makes to banks
Generally Accepted Accounting Principles (GAAP) - ANSWER an accepted set of
guidelines and practices for companies reporting financial information and for the
accounting profession
International Accounting Standards Board (IASB) - ANSWER The organization
responsible for evaluating, setting, or modifying GAAP in many countries outside the
USA. 15 members, 9 countries.
Investment Opportunity Schedule - ANSWER Collection of possible risk-return
combinations available from portfolios of individual assets.
