MHA 706 - MOD 6 PT2 - THE BASICS OF CAPITAL
BUDGETING COMPREHENSIVE EXAM QUESTIONS WITH
DETAILED VERIFIED AND 100% ACCURATE ANSWERS
BRAND NEW EXAM ALREADY GRADED A+ PASS
What are the three classifications of Capital Budget? Ans✓✓✓-
Mandatory Replacement (simple analysis)
- Expansion of existing services
- Expansion into new services (may require higher level approval)
What is the purpose of Financial Analysis for For-profit and Not-for-
Profit? Ans✓✓✓For-Profit: Projects that contribute to shareholder
wealth
Not-for-Profit: Projects expected effect on business financial condition.
What are the four parts in Capital Budgeting Financial Analysis?
Ans✓✓✓1) Estimate the Cash Flows
2) Assess the project's riskiness
3) Estimate the project cost of capital
4) Measure the financial impact
What is another term for Initial Cash Outlay? Ans✓✓✓Cost
What is Operating Flows in the Cash Flow concept? Ans✓✓✓The
revenue and the cost of the equipment
, What is the Terminal Flow in the Cash Flow concept? Ans✓✓✓Salvage
value or expected value of asset at end of its productive life
What is Project Cost of Capital also known as? Why is it important?
Ans✓✓✓Opportunity Cost of Capital or Discount Rate
Reviews the commitment of debt to invest in the project
What are the 9 Key Concepts of Cash Flow Estimation? Ans✓✓✓Focus
on:
- Cash Flow instead of Accounting Income
- Incremental cash flow
- Cash Flow timing (annually instead of daily)
- Project life of the investment (truncated if long)
Incorporate:
- Opportunity costs for capital and other resources
Consider:
- Impact of other business lines
- Inflation effects
- Any strategic value implications
BUDGETING COMPREHENSIVE EXAM QUESTIONS WITH
DETAILED VERIFIED AND 100% ACCURATE ANSWERS
BRAND NEW EXAM ALREADY GRADED A+ PASS
What are the three classifications of Capital Budget? Ans✓✓✓-
Mandatory Replacement (simple analysis)
- Expansion of existing services
- Expansion into new services (may require higher level approval)
What is the purpose of Financial Analysis for For-profit and Not-for-
Profit? Ans✓✓✓For-Profit: Projects that contribute to shareholder
wealth
Not-for-Profit: Projects expected effect on business financial condition.
What are the four parts in Capital Budgeting Financial Analysis?
Ans✓✓✓1) Estimate the Cash Flows
2) Assess the project's riskiness
3) Estimate the project cost of capital
4) Measure the financial impact
What is another term for Initial Cash Outlay? Ans✓✓✓Cost
What is Operating Flows in the Cash Flow concept? Ans✓✓✓The
revenue and the cost of the equipment
, What is the Terminal Flow in the Cash Flow concept? Ans✓✓✓Salvage
value or expected value of asset at end of its productive life
What is Project Cost of Capital also known as? Why is it important?
Ans✓✓✓Opportunity Cost of Capital or Discount Rate
Reviews the commitment of debt to invest in the project
What are the 9 Key Concepts of Cash Flow Estimation? Ans✓✓✓Focus
on:
- Cash Flow instead of Accounting Income
- Incremental cash flow
- Cash Flow timing (annually instead of daily)
- Project life of the investment (truncated if long)
Incorporate:
- Opportunity costs for capital and other resources
Consider:
- Impact of other business lines
- Inflation effects
- Any strategic value implications
