FINA 3770 Exam Questions and Answers Latest Update 2025-2026
Which of the statements below is false? - Answers Cash flow is an accounting measure of
performance during a specific period of time
If the company had a large depreciation expense during the period, the income statement could
show a loss for the period, even though the cash account may have grown during the same
period. - Answers True
cash flow is the increase in cash generated by a new project above the current cash flow
without the new project - Answers Incremental
involve(s) a cash flow that never occurs, but we need to add it as a cost or outflow of a new
project - Answers Opportunity costs
Erosion is the additional cash generated by a new project beyond the current cash flow with the
addition of a specific new project - Answers False
The advantage of _ over _ depreciation is that you can write off more of your capital costs in the
earlier years. - Answers MACRS; straight-line depreciation
The accelerated write-off capital costs in MACRS depreciation provides a taxable expense that
reduces taxes at a faster rate than with straight-line depreciation. Therefore, according to _
concepts, we can surmise that bigger tax cuts in the earlier years and lower tax cuts in the later
years are better than a steady tax cut each year. - Answers time-value of money
At the end of a project's life, we will recover any initial changes in _ from the beginning of the
project. - Answers working capital
The building of the _ cash flow of a project is the cornerstone of the financial decision models -
Answers incremental
A major metric of a company's health and its prospects for a long life is how much _ it can
generate - Answers cash flow
Which of the following statements is CORRECT? - Answers The operating cash flow (OCF) is the
estimated cash flow that the business's basic operations generated.
Which of the following items should NOT be included in estimating the project's cash flow? -
Answers Sunk costs
Which of the following statements is INCORRECT? - Answers Working capital will be
depreciated throughout the life of the project
Which of the following statements is INCORRECT? - Answers All assets will be fully depreciated
and have a book value of zero at the end of the project
Which of the statements below is false? - Answers Cash flow is an accounting measure of
performance during a specific period of time
If the company had a large depreciation expense during the period, the income statement could
show a loss for the period, even though the cash account may have grown during the same
period. - Answers True
cash flow is the increase in cash generated by a new project above the current cash flow
without the new project - Answers Incremental
involve(s) a cash flow that never occurs, but we need to add it as a cost or outflow of a new
project - Answers Opportunity costs
Erosion is the additional cash generated by a new project beyond the current cash flow with the
addition of a specific new project - Answers False
The advantage of _ over _ depreciation is that you can write off more of your capital costs in the
earlier years. - Answers MACRS; straight-line depreciation
The accelerated write-off capital costs in MACRS depreciation provides a taxable expense that
reduces taxes at a faster rate than with straight-line depreciation. Therefore, according to _
concepts, we can surmise that bigger tax cuts in the earlier years and lower tax cuts in the later
years are better than a steady tax cut each year. - Answers time-value of money
At the end of a project's life, we will recover any initial changes in _ from the beginning of the
project. - Answers working capital
The building of the _ cash flow of a project is the cornerstone of the financial decision models -
Answers incremental
A major metric of a company's health and its prospects for a long life is how much _ it can
generate - Answers cash flow
Which of the following statements is CORRECT? - Answers The operating cash flow (OCF) is the
estimated cash flow that the business's basic operations generated.
Which of the following items should NOT be included in estimating the project's cash flow? -
Answers Sunk costs
Which of the following statements is INCORRECT? - Answers Working capital will be
depreciated throughout the life of the project
Which of the following statements is INCORRECT? - Answers All assets will be fully depreciated
and have a book value of zero at the end of the project
