SOPHIA FINANCE MILESTONE 4A
COMPREHENSIVE TEST 2026 STUDY GUIDE
SOLVED QUESTIONS
◉ Which of the following principles refers to the assumption that a
project will be evaluated based on its incremental cash flows?
Answer: Stand-alone principle
◉ A cost that should be ignored when evaluating a project because
that cost has already been incurred and cannot be recouped is
referred to as which type of cost? Answer: Sunk
◉ Which of the following terms refers to the best option that was
foregone when a particular investment is selected? Answer:
Opportunity Cost
◉ Which one of the following terms is most commonly used to
describe the cash flows of a new project that are simply an offset of
reduced cash flows for a current project? Answer: Erosion
◉ A pro forma financial statement is a financial statement that:
Answer: projects future years operations.
, ◉ The amount by which a firms tax bill is reduced as a result of the
depreciation expense is referred to as the depreciation: Answer: tax
shield
◉ Which one of the following refers to a method of increasing the
rate at which an asset is depreciated? Answer: Accelerated cost
recovery system
◉ Forecasting risk is best defined as: Answer: Estimation risk
◉ Jamie is analyzing the estimated net present value of a project
under various what-if scenarios. They type of analysis that Jamie is
doing is best described as: Answer: scenarios analysis
◉ Mark is analyzing a proposed project to determine how changes
in the variable costs per unit would affect the projects net present
value. What type of analysis is Mark conduction? Answer: Sensitivity
analysis
◉ The opportunities that a manager has to modify a project once it
has started are called: Answer: managerial options
◉ Contingency planning focuses on the: Answer: managerial options
implicit in a project
COMPREHENSIVE TEST 2026 STUDY GUIDE
SOLVED QUESTIONS
◉ Which of the following principles refers to the assumption that a
project will be evaluated based on its incremental cash flows?
Answer: Stand-alone principle
◉ A cost that should be ignored when evaluating a project because
that cost has already been incurred and cannot be recouped is
referred to as which type of cost? Answer: Sunk
◉ Which of the following terms refers to the best option that was
foregone when a particular investment is selected? Answer:
Opportunity Cost
◉ Which one of the following terms is most commonly used to
describe the cash flows of a new project that are simply an offset of
reduced cash flows for a current project? Answer: Erosion
◉ A pro forma financial statement is a financial statement that:
Answer: projects future years operations.
, ◉ The amount by which a firms tax bill is reduced as a result of the
depreciation expense is referred to as the depreciation: Answer: tax
shield
◉ Which one of the following refers to a method of increasing the
rate at which an asset is depreciated? Answer: Accelerated cost
recovery system
◉ Forecasting risk is best defined as: Answer: Estimation risk
◉ Jamie is analyzing the estimated net present value of a project
under various what-if scenarios. They type of analysis that Jamie is
doing is best described as: Answer: scenarios analysis
◉ Mark is analyzing a proposed project to determine how changes
in the variable costs per unit would affect the projects net present
value. What type of analysis is Mark conduction? Answer: Sensitivity
analysis
◉ The opportunities that a manager has to modify a project once it
has started are called: Answer: managerial options
◉ Contingency planning focuses on the: Answer: managerial options
implicit in a project
