INTERNATIONAL ACCOUNTING SOLUTION
SET 2026 SCRIPT FULL PROBLEM
SOLUTIONS PASSED
⩥ What does a positive net present value mean? Answer: The investment
is expected to provide a rate of return on the initial investment greater
than the discount rate used to calculate present values
⩥ Which of the following factors is not needed to calculate net present
value? 1. The amount of initial capital invested 2. Estimated future cash
flows to be derived from the project over time 3. An appropriate
discount rate for determining present values 4. The cash flows from the
past year Answer: 4
⩥ Calculation of NPV for a foreign investment project is more complex
than for a domestic project because of additional risks that affect future
cash flows. Which risk refers to the possibility of loss due to unexpected
changes in currency values, interest rates and other financial
circumstances? Answer: Financial risk
⩥ The capital budgeting process includes three steps. What is the order
of the steps? a. project identification and definition b. evaluation and
selection c. monitoring and review Answer: a, b, c
,⩥ Which of the following capital budgeting techniques do not
incorporate the time value of money into the analysis? a. payback period
b. return on investment c. net present value d. internal rate of return
Answer: a and b
⩥ Which discount rate(s) is/are usually used in calculating net present
value? 1. the firm's cost of capital 2. industry rate of return 3. maximum
rate of return 4. average market rate of return Answer: Only 1
⩥ What are the factors needed to calculate net present value? 1. The
amount of initial capital invested 2. Estimated future cash flows to be
derived from the project over time 3. An appropriate discount rate for
determining present values Answer: 1, 2 and 3
⩥ Calculation of NPV for a foreign investment project is more complex
than for a domestic project because of additional risks that affect future
cash flows. Which risk refers to the possibility that political events
within a host country may adversely affect cash flows to be derived from
an investment in that country? Answer: Political risk
⩥ Which techniques are used in evaluating and making capital
investment decisions? a. payback period b. return on investment c. net
present value d. internal rate of return e. internal payback Answer: a, b, c
and d
, ⩥ What is the net present value of an investment? Answer: the difference
between the initial investment and the sum of the present value of all
future after-tax net cash inflows from the investment
⩥ Select the best answer to complete the following statement: "Project
cash flows are especially susceptible to ______, whereas parent
company cash flows can be significantly affected by ______." Answer:
economic risk, foreign exchange risk
⩥ To calculate NPV from a project perspective, IWC begins by
calculating cash flow from operation (CFO) in Hungarian forints. Which
formula is used? Answer: CFO = Earnings (after-tax) + Depreciation
⩥ To calculate NPV from a parent company perspective, IWC begins by
calculating cash flows to parent (CFP) on an after-tax basis in U.S.
dollars over the 3-year investment horizon. Refer to the formula to
calculate CFP and select the correct statement. Answer: Terminal value
in Year 3 is added to compute CFP
⩥ What is the role of accountants in the management control process?
Answer: They contribute to develop budgets and performance evaluation
systems
⩥ Factors should be considered in evaluating a potential foreign
investment from the parent company perspective include: 1. The form in
SET 2026 SCRIPT FULL PROBLEM
SOLUTIONS PASSED
⩥ What does a positive net present value mean? Answer: The investment
is expected to provide a rate of return on the initial investment greater
than the discount rate used to calculate present values
⩥ Which of the following factors is not needed to calculate net present
value? 1. The amount of initial capital invested 2. Estimated future cash
flows to be derived from the project over time 3. An appropriate
discount rate for determining present values 4. The cash flows from the
past year Answer: 4
⩥ Calculation of NPV for a foreign investment project is more complex
than for a domestic project because of additional risks that affect future
cash flows. Which risk refers to the possibility of loss due to unexpected
changes in currency values, interest rates and other financial
circumstances? Answer: Financial risk
⩥ The capital budgeting process includes three steps. What is the order
of the steps? a. project identification and definition b. evaluation and
selection c. monitoring and review Answer: a, b, c
,⩥ Which of the following capital budgeting techniques do not
incorporate the time value of money into the analysis? a. payback period
b. return on investment c. net present value d. internal rate of return
Answer: a and b
⩥ Which discount rate(s) is/are usually used in calculating net present
value? 1. the firm's cost of capital 2. industry rate of return 3. maximum
rate of return 4. average market rate of return Answer: Only 1
⩥ What are the factors needed to calculate net present value? 1. The
amount of initial capital invested 2. Estimated future cash flows to be
derived from the project over time 3. An appropriate discount rate for
determining present values Answer: 1, 2 and 3
⩥ Calculation of NPV for a foreign investment project is more complex
than for a domestic project because of additional risks that affect future
cash flows. Which risk refers to the possibility that political events
within a host country may adversely affect cash flows to be derived from
an investment in that country? Answer: Political risk
⩥ Which techniques are used in evaluating and making capital
investment decisions? a. payback period b. return on investment c. net
present value d. internal rate of return e. internal payback Answer: a, b, c
and d
, ⩥ What is the net present value of an investment? Answer: the difference
between the initial investment and the sum of the present value of all
future after-tax net cash inflows from the investment
⩥ Select the best answer to complete the following statement: "Project
cash flows are especially susceptible to ______, whereas parent
company cash flows can be significantly affected by ______." Answer:
economic risk, foreign exchange risk
⩥ To calculate NPV from a project perspective, IWC begins by
calculating cash flow from operation (CFO) in Hungarian forints. Which
formula is used? Answer: CFO = Earnings (after-tax) + Depreciation
⩥ To calculate NPV from a parent company perspective, IWC begins by
calculating cash flows to parent (CFP) on an after-tax basis in U.S.
dollars over the 3-year investment horizon. Refer to the formula to
calculate CFP and select the correct statement. Answer: Terminal value
in Year 3 is added to compute CFP
⩥ What is the role of accountants in the management control process?
Answer: They contribute to develop budgets and performance evaluation
systems
⩥ Factors should be considered in evaluating a potential foreign
investment from the parent company perspective include: 1. The form in
