Exam 2 Fina 5320 || Possible Questions Accurately Answered.
OCF using top-down approach correct answers = Sales - Costs - Taxes
The computation of equivalent annual costs is useful when comparing projects with unequal
______. correct answers Lives
Side effects from investing in a project refer to cash flows from _____. correct answers •
Synergy effects
• Erosion effects
Using your personal savings to invest in your business is considered to have an ____ ____
because you are giving up the use of these funds for other investments or uses, such as, a
vacation or paying off a debt. correct answers Opportunity costs
What is given greater importance in capital budgeting problems in corporate finance? correct
answers Cash flows
Identify the three main sources of cash flows over the life of a typical project. correct answers •
Cash outflows from investment in plant and equipment at the inception of the project
• Net cash flows from sales and expenses over the life of the project
• Net cash flows from salvage value at the end of the project
What is an example of a sunk cost? correct answers Test marketing expenses
What is the real interest rate if the nominal annual interest rate is 10 percent and the annual
inflation rate is 4%. correct answers 5.77%
Incremental cash flows of a project are changes in a firm's cash flows that occur as a direct
consequence of ____. correct answers Accepting a project
, Sunk costs are costs that ____. correct answers Have already occurred and are not affected by
accepting or rejecting a project
The shareholders' books in the US follow the rules of the _____. correct answers Financial
Accounting Standards Board (FASB)
What is considered relevant cash flows? correct answers • Cash flows from opportunity costs
• Cash flows from synergy effects
• Cash flows from erosion effects
True or false: A sunk cost is an example of a relevant incremental cash flow. correct answers
False
Synergy will ____ the sales of existing products. correct answers Increase
True or false: Opportunity costs can be ignored when determining the financial feasibility of a
project. correct answers False
What is true about allocated costs? correct answers • These costs benefit more than one project
• These costs are allocated to more than one project.
Assets in the five-year MACRS class are depreciated over ____ years. correct answers Six
Allocated costs arise when a specific expenditure ____. correct answers Benefits more than one
project or division
Investment in net working capital arises when ____. correct answers • Inventory is purchased
• Credit sales are made
OCF using top-down approach correct answers = Sales - Costs - Taxes
The computation of equivalent annual costs is useful when comparing projects with unequal
______. correct answers Lives
Side effects from investing in a project refer to cash flows from _____. correct answers •
Synergy effects
• Erosion effects
Using your personal savings to invest in your business is considered to have an ____ ____
because you are giving up the use of these funds for other investments or uses, such as, a
vacation or paying off a debt. correct answers Opportunity costs
What is given greater importance in capital budgeting problems in corporate finance? correct
answers Cash flows
Identify the three main sources of cash flows over the life of a typical project. correct answers •
Cash outflows from investment in plant and equipment at the inception of the project
• Net cash flows from sales and expenses over the life of the project
• Net cash flows from salvage value at the end of the project
What is an example of a sunk cost? correct answers Test marketing expenses
What is the real interest rate if the nominal annual interest rate is 10 percent and the annual
inflation rate is 4%. correct answers 5.77%
Incremental cash flows of a project are changes in a firm's cash flows that occur as a direct
consequence of ____. correct answers Accepting a project
, Sunk costs are costs that ____. correct answers Have already occurred and are not affected by
accepting or rejecting a project
The shareholders' books in the US follow the rules of the _____. correct answers Financial
Accounting Standards Board (FASB)
What is considered relevant cash flows? correct answers • Cash flows from opportunity costs
• Cash flows from synergy effects
• Cash flows from erosion effects
True or false: A sunk cost is an example of a relevant incremental cash flow. correct answers
False
Synergy will ____ the sales of existing products. correct answers Increase
True or false: Opportunity costs can be ignored when determining the financial feasibility of a
project. correct answers False
What is true about allocated costs? correct answers • These costs benefit more than one project
• These costs are allocated to more than one project.
Assets in the five-year MACRS class are depreciated over ____ years. correct answers Six
Allocated costs arise when a specific expenditure ____. correct answers Benefits more than one
project or division
Investment in net working capital arises when ____. correct answers • Inventory is purchased
• Credit sales are made
