FINC 341 Exam 3 Theory UPDATED ACTUAL Questions And Correct Answers
Terms in this set (51)
NPV, IRR, and MIRR will always agree as to whether a True
project with normal cash flows is profitable or not.
If a project has nonnormal cash flows, the IRR can be less True
than the cost of capital while the NPV is positive.
, A nonnormal project's NPV will approach the value of the False
project's last cash flow at t=n as the cost of capital
approaches infinity.
A nonnormal project's NPV will approach the value of the True
project's last cash flow at t=0 as the cost of capital
approaches infinity.
As the cost of capital increases for a project with normal True
cashflows, and the IRR is less than the cost of capital, the
MIRR will increase if the project has positive interim cash
flows.
The capital structure that maximizes the firm's earnings False
per share is also the capital structure that minimizes
WACC.
The capital structure that maximizes the firm's stock price True
is also the capital structure that minimizes WACC.
Lower operating leverage stems from having lower fixed True
costs.
The higher a firm's tax rate, the more attractive debt True
capital will be to that firm.
The more debt a firm has in its capital structure, the True
higher that firm's financial leverage will be.
In general, as a firm begins to add debt to its capital True
structure, the firm's EPS will improve, but the riskiness or
EPS will increase as well.
Cannibalized sales from another product within the same True
firm should not count as cash flow for the new product of
that firm since the NPV is trying to measure the amount of
new value added to the firm.
Accelerated deprecation usually makes the sale of the True
equipment a gain rather than a loss.
Accelerated depreciation increases Net Cash Flows in True
the earlier years of a project.
The cost of doing a test market for a new product this True
past year should not be a cash flow on the line when
considering whether to nationally market the product
now.
Apple watches are going to cannibalize iPhone sales. False
Terms in this set (51)
NPV, IRR, and MIRR will always agree as to whether a True
project with normal cash flows is profitable or not.
If a project has nonnormal cash flows, the IRR can be less True
than the cost of capital while the NPV is positive.
, A nonnormal project's NPV will approach the value of the False
project's last cash flow at t=n as the cost of capital
approaches infinity.
A nonnormal project's NPV will approach the value of the True
project's last cash flow at t=0 as the cost of capital
approaches infinity.
As the cost of capital increases for a project with normal True
cashflows, and the IRR is less than the cost of capital, the
MIRR will increase if the project has positive interim cash
flows.
The capital structure that maximizes the firm's earnings False
per share is also the capital structure that minimizes
WACC.
The capital structure that maximizes the firm's stock price True
is also the capital structure that minimizes WACC.
Lower operating leverage stems from having lower fixed True
costs.
The higher a firm's tax rate, the more attractive debt True
capital will be to that firm.
The more debt a firm has in its capital structure, the True
higher that firm's financial leverage will be.
In general, as a firm begins to add debt to its capital True
structure, the firm's EPS will improve, but the riskiness or
EPS will increase as well.
Cannibalized sales from another product within the same True
firm should not count as cash flow for the new product of
that firm since the NPV is trying to measure the amount of
new value added to the firm.
Accelerated deprecation usually makes the sale of the True
equipment a gain rather than a loss.
Accelerated depreciation increases Net Cash Flows in True
the earlier years of a project.
The cost of doing a test market for a new product this True
past year should not be a cash flow on the line when
considering whether to nationally market the product
now.
Apple watches are going to cannibalize iPhone sales. False
