FINA 3770 EXAM 2025/2026 QUESTIONS
AND ANSWERS 100% PASS
Which of the statements below is false? - ANS Cash flow is an accounting measure of
performance during a specific period of time
If the company had a large depreciation expense during the period, the income statement
could show a loss for the period, even though the cash account may have grown during the
same period. - ANS True
cash flow is the increase in cash generated by a new project above the current cash flow
without the new project - ANS Incremental
involve(s) a cash flow that never occurs, but we need to add it as a cost or outflow of a new
project - ANS Opportunity costs
Erosion is the additional cash generated by a new project beyond the current cash flow with the
addition of a specific new project - ANS False
The advantage of _ over _ depreciation is that you can write off more of your capital costs in
the earlier years. - ANS MACRS; straight-line depreciation
The accelerated write-off capital costs in MACRS depreciation provides a taxable expense that
reduces taxes at a faster rate than with straight-line depreciation. Therefore, according to _
1 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED
, concepts, we can surmise that bigger tax cuts in the earlier years and lower tax cuts in the later
years are better than a steady tax cut each year. - ANS time-value of money
At the end of a project's life, we will recover any initial changes in _ from the beginning of the
project. - ANS working capital
The building of the _ cash flow of a project is the cornerstone of the financial decision models -
ANS incremental
A major metric of a company's health and its prospects for a long life is how much _ it can
generate - ANS cash flow
Which of the following statements is CORRECT? - ANS The operating cash flow (OCF) is the
estimated cash flow that the business's basic operations generated.
Which of the following items should NOT be included in estimating the project's cash flow? -
ANS Sunk costs
Which of the following statements is INCORRECT? - ANS Working capital will be depreciated
throughout the life of the project
Which of the following statements is INCORRECT? - ANS All assets will be fully depreciated
and have a book value of zero at the end of the project
Which of the following is NOT a step in estimating incremental cash flow for capital budgeting
decisions? - ANS All are steps:
-Estimate the project's operating cash flows for each period
-Determine the recaptured working capital and the cash flow from the disposal of assets at the
end of the project
-Determine the initial capital investment for the project
2 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED
AND ANSWERS 100% PASS
Which of the statements below is false? - ANS Cash flow is an accounting measure of
performance during a specific period of time
If the company had a large depreciation expense during the period, the income statement
could show a loss for the period, even though the cash account may have grown during the
same period. - ANS True
cash flow is the increase in cash generated by a new project above the current cash flow
without the new project - ANS Incremental
involve(s) a cash flow that never occurs, but we need to add it as a cost or outflow of a new
project - ANS Opportunity costs
Erosion is the additional cash generated by a new project beyond the current cash flow with the
addition of a specific new project - ANS False
The advantage of _ over _ depreciation is that you can write off more of your capital costs in
the earlier years. - ANS MACRS; straight-line depreciation
The accelerated write-off capital costs in MACRS depreciation provides a taxable expense that
reduces taxes at a faster rate than with straight-line depreciation. Therefore, according to _
1 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED
, concepts, we can surmise that bigger tax cuts in the earlier years and lower tax cuts in the later
years are better than a steady tax cut each year. - ANS time-value of money
At the end of a project's life, we will recover any initial changes in _ from the beginning of the
project. - ANS working capital
The building of the _ cash flow of a project is the cornerstone of the financial decision models -
ANS incremental
A major metric of a company's health and its prospects for a long life is how much _ it can
generate - ANS cash flow
Which of the following statements is CORRECT? - ANS The operating cash flow (OCF) is the
estimated cash flow that the business's basic operations generated.
Which of the following items should NOT be included in estimating the project's cash flow? -
ANS Sunk costs
Which of the following statements is INCORRECT? - ANS Working capital will be depreciated
throughout the life of the project
Which of the following statements is INCORRECT? - ANS All assets will be fully depreciated
and have a book value of zero at the end of the project
Which of the following is NOT a step in estimating incremental cash flow for capital budgeting
decisions? - ANS All are steps:
-Estimate the project's operating cash flows for each period
-Determine the recaptured working capital and the cash flow from the disposal of assets at the
end of the project
-Determine the initial capital investment for the project
2 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED
