Fina 5320 EXAM QUESTIONS AND VERIFIED
ACCURATE SOLUTION |GET IT 100% ACCURATE!!!
Historically, most trading on the NYSE was done ____ but currently, most trading on the NYSE is done
______. - ANSWER-on the floor; electronically
In a stock price quote, the number of shares outstanding multiplied by the current price per share is
known as the ____. - ANSWER-market cap
True or false: A market order allows the investor to choose the price they will transact at. - ANSWER-
false
True or false: Trades on NASDAQ occur on a trading floor. - ANSWER-False
In a stock price quote, the ask price is ______ the bid price. - ANSWER-higher than
The difference between a firm's current and its current liabilities is known as the __________. -
ANSWER-net working capital
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 are uses such as, a vacation or
paying off a debt - ANSWER-opportunity cost
What is the real interest rate if the nominal annual interest rate is 10% and the annual inflation rate is
4%? - ANSWER-5.77%
Incremental cash flows of a project are changes in a firm's cash flows that occur as a direct consequence
of ___________. - ANSWER-accepting a project
Synergy will _______ the sales of existing products. - ANSWER-increase
What is Net working capital? - ANSWER-current assets minus current liabilities
,According to the bottom up approach, what is the OCF if EBIT is $600, depreciation is $1,800, and the
tax rate is 30%? - ANSWER-$2,220
Have a general rule, when estimating equivalent annual costs, __________ cash flows should be used.
(nominal or real) - ANSWER-real
Buying new cost cutting equipment affects operating cash flows by: - ANSWER-- increasing pretax
income
- increasing taxes
- increasing the depreciation deduction
According to the top-down approach what is the operating cash flow of sales are $200,000, total cash
costs are $190,636 and the tax bill is $1,144? - ANSWER-$8220;
$200,000 - 190,636 - 1,144
When bidding for a job, a competing firm can use the npv approach to determine their bid. Once the bid
is submitted, the firm will win the contract for the project if their bid is the: - ANSWER-lowest
Interest expenses incurred on debt financing are _________ when Computing cash flows from a project.
- ANSWER-ignored
Firm generally maintain two sets of books, one for the IRS, and one for the purposes of generating
financial statements according to the ___________. - ANSWER-FASB
Which of the following statements regarding the relationship between Book value, sales price, and taxes
are true when a firm sells a fixed asset? - ANSWER-- taxes are based on the difference between the book
value and the sales price
- book value represents the purchase price minus the accumulated depreciation
- there will be a tax savings if the book value exceeds the sales price
, The Net Present Value technique does not discount earnings because earnings _______. - ANSWER-do
not represent real money
Investment in net working capital arises when _________. - ANSWER-- credit sales are made
- cash is kept for unexpected expenditures
- inventory is purchased
Among the three main sources of cash flow, which source of cash flow is the most important and also
the most difficult to forecast? - ANSWER-The operating cash flows from net sales over the life of the
project
Opportunity costs are classified as: - ANSWER-relevant costs
It is appropriate to use the approximate formula for estimating the real interest rate when: - ANSWER-
the interest rate and inflation rate are low
Sometimes when the low bidder wins the bid on a project, it is because they have under-bid the project.
In other words, the bid they have submitted probably won't even cover the cost of the project. When
this happens, the lower bidder is said to suffer from the: - ANSWER-winner's curse
Discounting is the process of _______. - ANSWER-Calculating the present value of either a lump sum or a
series of cash flows
If the tax rate increases, the value of the depreciation tax shield will _________. - ANSWER-increase
How does depreciation affect the operating cash flow? - ANSWER-Depreciation expense reduces the
taxable income in taxes, and increases the operating cash flow
Which of the following is the equation for estimating operating cash flow using the tax shield approach?
- ANSWER-OCF = (Sales - costs)(1 - tax rate) +dep x tax rate
ACCURATE SOLUTION |GET IT 100% ACCURATE!!!
Historically, most trading on the NYSE was done ____ but currently, most trading on the NYSE is done
______. - ANSWER-on the floor; electronically
In a stock price quote, the number of shares outstanding multiplied by the current price per share is
known as the ____. - ANSWER-market cap
True or false: A market order allows the investor to choose the price they will transact at. - ANSWER-
false
True or false: Trades on NASDAQ occur on a trading floor. - ANSWER-False
In a stock price quote, the ask price is ______ the bid price. - ANSWER-higher than
The difference between a firm's current and its current liabilities is known as the __________. -
ANSWER-net working capital
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 are uses such as, a vacation or
paying off a debt - ANSWER-opportunity cost
What is the real interest rate if the nominal annual interest rate is 10% and the annual inflation rate is
4%? - ANSWER-5.77%
Incremental cash flows of a project are changes in a firm's cash flows that occur as a direct consequence
of ___________. - ANSWER-accepting a project
Synergy will _______ the sales of existing products. - ANSWER-increase
What is Net working capital? - ANSWER-current assets minus current liabilities
,According to the bottom up approach, what is the OCF if EBIT is $600, depreciation is $1,800, and the
tax rate is 30%? - ANSWER-$2,220
Have a general rule, when estimating equivalent annual costs, __________ cash flows should be used.
(nominal or real) - ANSWER-real
Buying new cost cutting equipment affects operating cash flows by: - ANSWER-- increasing pretax
income
- increasing taxes
- increasing the depreciation deduction
According to the top-down approach what is the operating cash flow of sales are $200,000, total cash
costs are $190,636 and the tax bill is $1,144? - ANSWER-$8220;
$200,000 - 190,636 - 1,144
When bidding for a job, a competing firm can use the npv approach to determine their bid. Once the bid
is submitted, the firm will win the contract for the project if their bid is the: - ANSWER-lowest
Interest expenses incurred on debt financing are _________ when Computing cash flows from a project.
- ANSWER-ignored
Firm generally maintain two sets of books, one for the IRS, and one for the purposes of generating
financial statements according to the ___________. - ANSWER-FASB
Which of the following statements regarding the relationship between Book value, sales price, and taxes
are true when a firm sells a fixed asset? - ANSWER-- taxes are based on the difference between the book
value and the sales price
- book value represents the purchase price minus the accumulated depreciation
- there will be a tax savings if the book value exceeds the sales price
, The Net Present Value technique does not discount earnings because earnings _______. - ANSWER-do
not represent real money
Investment in net working capital arises when _________. - ANSWER-- credit sales are made
- cash is kept for unexpected expenditures
- inventory is purchased
Among the three main sources of cash flow, which source of cash flow is the most important and also
the most difficult to forecast? - ANSWER-The operating cash flows from net sales over the life of the
project
Opportunity costs are classified as: - ANSWER-relevant costs
It is appropriate to use the approximate formula for estimating the real interest rate when: - ANSWER-
the interest rate and inflation rate are low
Sometimes when the low bidder wins the bid on a project, it is because they have under-bid the project.
In other words, the bid they have submitted probably won't even cover the cost of the project. When
this happens, the lower bidder is said to suffer from the: - ANSWER-winner's curse
Discounting is the process of _______. - ANSWER-Calculating the present value of either a lump sum or a
series of cash flows
If the tax rate increases, the value of the depreciation tax shield will _________. - ANSWER-increase
How does depreciation affect the operating cash flow? - ANSWER-Depreciation expense reduces the
taxable income in taxes, and increases the operating cash flow
Which of the following is the equation for estimating operating cash flow using the tax shield approach?
- ANSWER-OCF = (Sales - costs)(1 - tax rate) +dep x tax rate
