FINA 5320 Exam 2 Ch. 6,8,9,13 || Possible Questions Accurately
Answered.
The changes in a firm's future cash flows that are a direct consequence of accepting a project are
called _____ cash flows.
A. incremental
B. stand-alone
C. opportunity
D. net present value
E. erosion correct answers A. incremental
The annual annuity stream of payments with the same present value as a project's costs is called
the project's _____ cost.
A. incremental
B. sunk
C. opportunity
D. erosion
E. equivalent annual correct answers E. equivalent annual
,A cost that has already been paid, or the liability to pay has already been incurred, is a(n):
A. salvage value expense.
B. net working capital expense.
C. sunk cost.
D. opportunity cost.
E. erosion cost. correct answers C. sunk cost.
The most valuable investment given up if an alternative investment is chosen is a(n):
A. salvage value expense.
B. net working capital expense.
C. sunk cost.
D. opportunity cost.
E. erosion cost. correct answers D. opportunity cost.
A decrease in a firm's current cash flows resulting from the implementation of a new project is
referred to as:
,A. salvage value expenses.
B. net working capital expenses.
C. sunk costs.
D. opportunity costs.
E. erosion costs. correct answers E. erosion costs.
The depreciation method currently allowed under U.S. tax law governing the accelerated write-
off of property under various lifetime classifications is called _____ depreciation.
A. FIFO
B. MACRS
C. straight-line
D. sum-of-years digits
E. curvilinear correct answers B. MACRS
The cash flow tax savings generated as a result of a firm's tax-deductible depreciation expense is
called the:
A. aftertax depreciation savings.
, B. depreciable basis.
C. depreciation tax shield.
D. operating cash flow.
E. aftertax salvage value. correct answers C. depreciation tax shield.
The cash flow from a project is computed as the:
A. net operating cash flow generated by the project, less any sunk costs and erosion costs.
B. sum of the incremental operating cash flow and aftertax salvage value of the project.
C. net income generated by the project, plus the annual depreciation expense.
D. sum of the incremental operating cash flow, capital spending, and net working capital cash
flows incurred by the project.
E. sum of the sunk costs, opportunity costs, and erosion costs of the project. correct answers D.
sum of the incremental operating cash flow, capital spending, and net working capital cash flows
incurred by the project.
Interest rates or rates of return on investments that have been adjusted for the effects of inflation
are called _____ rates.
A. real
Answered.
The changes in a firm's future cash flows that are a direct consequence of accepting a project are
called _____ cash flows.
A. incremental
B. stand-alone
C. opportunity
D. net present value
E. erosion correct answers A. incremental
The annual annuity stream of payments with the same present value as a project's costs is called
the project's _____ cost.
A. incremental
B. sunk
C. opportunity
D. erosion
E. equivalent annual correct answers E. equivalent annual
,A cost that has already been paid, or the liability to pay has already been incurred, is a(n):
A. salvage value expense.
B. net working capital expense.
C. sunk cost.
D. opportunity cost.
E. erosion cost. correct answers C. sunk cost.
The most valuable investment given up if an alternative investment is chosen is a(n):
A. salvage value expense.
B. net working capital expense.
C. sunk cost.
D. opportunity cost.
E. erosion cost. correct answers D. opportunity cost.
A decrease in a firm's current cash flows resulting from the implementation of a new project is
referred to as:
,A. salvage value expenses.
B. net working capital expenses.
C. sunk costs.
D. opportunity costs.
E. erosion costs. correct answers E. erosion costs.
The depreciation method currently allowed under U.S. tax law governing the accelerated write-
off of property under various lifetime classifications is called _____ depreciation.
A. FIFO
B. MACRS
C. straight-line
D. sum-of-years digits
E. curvilinear correct answers B. MACRS
The cash flow tax savings generated as a result of a firm's tax-deductible depreciation expense is
called the:
A. aftertax depreciation savings.
, B. depreciable basis.
C. depreciation tax shield.
D. operating cash flow.
E. aftertax salvage value. correct answers C. depreciation tax shield.
The cash flow from a project is computed as the:
A. net operating cash flow generated by the project, less any sunk costs and erosion costs.
B. sum of the incremental operating cash flow and aftertax salvage value of the project.
C. net income generated by the project, plus the annual depreciation expense.
D. sum of the incremental operating cash flow, capital spending, and net working capital cash
flows incurred by the project.
E. sum of the sunk costs, opportunity costs, and erosion costs of the project. correct answers D.
sum of the incremental operating cash flow, capital spending, and net working capital cash flows
incurred by the project.
Interest rates or rates of return on investments that have been adjusted for the effects of inflation
are called _____ rates.
A. real
