Corporate Finance UPDATED ACTUAL
Questions and CORRECT Answers
a company that utilizes the MACRS system of depreciation - CORRECT ANSWER✔✔- will
have a greater taxs shield in year two of a project than it would have if the firm had opted for
straight-line depreciation
a project has a discounted payback period that is equal to the required payback period. Given
this which of the following statements must be true? - CORRECT ANSWER✔✔- The projec
tmust also be acceptable under the payback rule AND The project must have a profitability
index that is equal to or greater than 1
a project has a net present value of zero. Which one of the following best describes this
project? - CORRECT ANSWER✔✔- The project's cash inflows equal its cash outflows in
current dollar terms.
A project has a required payback period of three years. Which one of the following
statements is correct concerning the payback analysis of this project? - CORRECT
ANSWER✔✔- The cash flow in year two is valued just as highly as the cash flow in year
one.
A project has an initial cost of $27,400 and a market value of $32,600. What is the difference
between these two value called? - CORRECT ANSWER✔✔- net present value
a project with financing type cash flows is typified by a project that has which one of the
following characteristics? - CORRECT ANSWER✔✔- a cash inflow at time zero
A project's average net income divided by its average book value is referred to as the project's
average: - CORRECT ANSWER✔✔- accounting return
Allof the following are related to a proposed project. Which of these should be included in
the case flow at time zero? - CORRECT ANSWER✔✔- Purchase of $1,400 of parts
inventory needed to support the project AND $6,500 of equipment needed to commence the
project
, Applying the discounted payback decision rule to all projects may cause - CORRECT
ANSWER✔✔- some positive net present value projects to be rejected.
Brubaker & Goss has received requests for capital investment funds for next year from each
of its five devisions.... - CORRECT ANSWER✔✔- soft rationing
Changes in the net working capital requirements - CORRECT ANSWER✔✔- can affect the
cash flows of a project every year of the project's life.
Dan is comparing three machines to determine which one to purchase... - CORRECT
ANSWER✔✔- equivalent annual cost
Danielle's is a furniture store that is considering adding appliances to its offerings... -
CORRECT ANSWER✔✔- Utilizing the cred offered by a supplier to purchase the appliance
inventory AND benefiting from increased furniture sales to appliance customers AND
purchasing parts for inventory to handle any appliance repairs that might be necessary
decreasing which one of the following will increase the acceptability of a project -
CORRECT ANSWER✔✔- equivalent annual cost
Dexte Smith co. is replacing a machine simply because it has worn out... which of the
following statements is correct? - CORRECT ANSWER✔✔- The new machine will generate
positive operating cash flows, at least in the first few years of its life.
Douglass Interiors is consideringtwo mutually exclusive projects and have determined that
the crossover rates for these projects is 11.7 percent. - CORRECT ANSWER✔✔- You cannot
determine which project should be accepted given the information provided.
Forecasting risk emphasizes the point that the correctness of any decision to accept or reject a
project is highly dependent upon the: - CORRECT ANSWER✔✔- accuracy of the projected
cash flows.
Forecasting risk is defined as the possibly that: - CORRECT ANSWER✔✔- incorrect
decisions will be made due to erroneous cash flow projections
Questions and CORRECT Answers
a company that utilizes the MACRS system of depreciation - CORRECT ANSWER✔✔- will
have a greater taxs shield in year two of a project than it would have if the firm had opted for
straight-line depreciation
a project has a discounted payback period that is equal to the required payback period. Given
this which of the following statements must be true? - CORRECT ANSWER✔✔- The projec
tmust also be acceptable under the payback rule AND The project must have a profitability
index that is equal to or greater than 1
a project has a net present value of zero. Which one of the following best describes this
project? - CORRECT ANSWER✔✔- The project's cash inflows equal its cash outflows in
current dollar terms.
A project has a required payback period of three years. Which one of the following
statements is correct concerning the payback analysis of this project? - CORRECT
ANSWER✔✔- The cash flow in year two is valued just as highly as the cash flow in year
one.
A project has an initial cost of $27,400 and a market value of $32,600. What is the difference
between these two value called? - CORRECT ANSWER✔✔- net present value
a project with financing type cash flows is typified by a project that has which one of the
following characteristics? - CORRECT ANSWER✔✔- a cash inflow at time zero
A project's average net income divided by its average book value is referred to as the project's
average: - CORRECT ANSWER✔✔- accounting return
Allof the following are related to a proposed project. Which of these should be included in
the case flow at time zero? - CORRECT ANSWER✔✔- Purchase of $1,400 of parts
inventory needed to support the project AND $6,500 of equipment needed to commence the
project
, Applying the discounted payback decision rule to all projects may cause - CORRECT
ANSWER✔✔- some positive net present value projects to be rejected.
Brubaker & Goss has received requests for capital investment funds for next year from each
of its five devisions.... - CORRECT ANSWER✔✔- soft rationing
Changes in the net working capital requirements - CORRECT ANSWER✔✔- can affect the
cash flows of a project every year of the project's life.
Dan is comparing three machines to determine which one to purchase... - CORRECT
ANSWER✔✔- equivalent annual cost
Danielle's is a furniture store that is considering adding appliances to its offerings... -
CORRECT ANSWER✔✔- Utilizing the cred offered by a supplier to purchase the appliance
inventory AND benefiting from increased furniture sales to appliance customers AND
purchasing parts for inventory to handle any appliance repairs that might be necessary
decreasing which one of the following will increase the acceptability of a project -
CORRECT ANSWER✔✔- equivalent annual cost
Dexte Smith co. is replacing a machine simply because it has worn out... which of the
following statements is correct? - CORRECT ANSWER✔✔- The new machine will generate
positive operating cash flows, at least in the first few years of its life.
Douglass Interiors is consideringtwo mutually exclusive projects and have determined that
the crossover rates for these projects is 11.7 percent. - CORRECT ANSWER✔✔- You cannot
determine which project should be accepted given the information provided.
Forecasting risk emphasizes the point that the correctness of any decision to accept or reject a
project is highly dependent upon the: - CORRECT ANSWER✔✔- accuracy of the projected
cash flows.
Forecasting risk is defined as the possibly that: - CORRECT ANSWER✔✔- incorrect
decisions will be made due to erroneous cash flow projections
