Shareholders only receive money after what is done? - correct answer
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✔suppliers have been paid
| | | |
wages to workers have been paid.
| | | | |
interest to bondholders have been paid.
| | | | |
taxes have been paid.
| | |
Capital Budgeting - correct answer ✔The process of determining exactly which
| | | | | | | | | |
assets to invest in and how much to invest; also called capital expenditure
| | | | | | | | | | | | |
decision or capital investment decision.
| | | | |
Future Value (FV) - correct answer ✔the amount to which a cash flow or series
| | | | | | | | | | | | | |
of cash flows will grow over a given period of time when compounded at a
| | | | | | | | | | | | | | |
given interest rate
| | |
FV Equation - correct answer ✔FVt = PV x (1+r)t
| | | | | | | | |
What is a present value? - correct answer ✔the amount of money you would
| | | | | | | | | | | | |
need to invest today in order to duplicate some future dollar amount
| | | | | | | | | | | |
,PV formula - correct answer ✔CFsubt/(1+r)^t
| | | | |
What does NPV measure? - correct answer ✔measures the value created for
| | | | | | | | | | |
shareholders by an investment project
| | | | |
What should we do if NPV > 0? Less than 0? - correct answer ✔If NPV > 0, then
| | | | | | | | | | | | | | | | | |
the project increases shareholder value and should be accepted
| | | | | | | | |
If NPV < 0, the project destroys shareholder value and should be rejected.
| | | | | | | | | | | |
Are early cash flows for projects typically positive or negative? - correct answer
| | | | | | | | | | | |
✔Negative
|
Is replacement investment a tool for evaluating projects? - correct answer ✔No
| | | | | | | | | | |
What are three tools for evaluating projects? - correct answer ✔NPV, IRR,
| | | | | | | | | | |
Discounted Payback Period
| | |
True or false - If capital projects are independent and consistent, the NPV and
| | | | | | | | | | | | |
IRR methods should result in "accept" or "reject" decisions. - correct answer
| | | | | | | | | | | |
✔True
|
What does it mean when a project is independent? - correct answer
| | | | | | | | | | |
✔Acceptance or rejection is independent of the acceptance or rejection of
| | | | | | | | | | |
other projects.
| |
, What does it mean when a project is mutually exclusive? - correct answer
| | | | | | | | | | | |
✔Can accept "A" or you can accept "B" or you can reject both of them, but
| | | | | | | | | | | | | | | |
cannot accept both of them.
| | | | |
Payback Period - correct answer ✔the number of periods (usually measured in
| | | | | | | | | | |
years) required for the sum of the project's expected cash flows to equal its
| | | | | | | | | | | | | |
initial cash outlay. In other words, the payback period is the time it takes for a
| | | | | | | | | | | | | | | |
firm to recover its initial investment.
| | | | | |
Internal Rate of Return - correct answer ✔the discount rate that makes the
| | | | | | | | | | | |
|NPV of an investment zero
| | | |
Profitability Index - correct answer ✔The present value of an investment's
| | | | | | | | | |
future cash flows divided by its initial cost. Also called benefit/cost ratio.
| | | | | | | | | | | |
What are problems with multiple IRRs? - correct answer ✔multiple IRRs can
| | | | | | | | | | |
exist; scaling (decisions differ in scale) and timing
| | | | | | | |
Crossover Rate - correct answer ✔the cost of capital at which the net present
| | | | | | | | | | | | |
values of two projects are equal
| | | | | |
When will NPV and IRR not give the same decision? - correct answer ✔when
| | | | | | | | | | | | |
cash flow signs change more than once and when projects are mutually
| | | | | | | | | | | |
exclusive
|
| | | | | | | | | |
✔suppliers have been paid
| | | |
wages to workers have been paid.
| | | | |
interest to bondholders have been paid.
| | | | |
taxes have been paid.
| | |
Capital Budgeting - correct answer ✔The process of determining exactly which
| | | | | | | | | |
assets to invest in and how much to invest; also called capital expenditure
| | | | | | | | | | | | |
decision or capital investment decision.
| | | | |
Future Value (FV) - correct answer ✔the amount to which a cash flow or series
| | | | | | | | | | | | | |
of cash flows will grow over a given period of time when compounded at a
| | | | | | | | | | | | | | |
given interest rate
| | |
FV Equation - correct answer ✔FVt = PV x (1+r)t
| | | | | | | | |
What is a present value? - correct answer ✔the amount of money you would
| | | | | | | | | | | | |
need to invest today in order to duplicate some future dollar amount
| | | | | | | | | | | |
,PV formula - correct answer ✔CFsubt/(1+r)^t
| | | | |
What does NPV measure? - correct answer ✔measures the value created for
| | | | | | | | | | |
shareholders by an investment project
| | | | |
What should we do if NPV > 0? Less than 0? - correct answer ✔If NPV > 0, then
| | | | | | | | | | | | | | | | | |
the project increases shareholder value and should be accepted
| | | | | | | | |
If NPV < 0, the project destroys shareholder value and should be rejected.
| | | | | | | | | | | |
Are early cash flows for projects typically positive or negative? - correct answer
| | | | | | | | | | | |
✔Negative
|
Is replacement investment a tool for evaluating projects? - correct answer ✔No
| | | | | | | | | | |
What are three tools for evaluating projects? - correct answer ✔NPV, IRR,
| | | | | | | | | | |
Discounted Payback Period
| | |
True or false - If capital projects are independent and consistent, the NPV and
| | | | | | | | | | | | |
IRR methods should result in "accept" or "reject" decisions. - correct answer
| | | | | | | | | | | |
✔True
|
What does it mean when a project is independent? - correct answer
| | | | | | | | | | |
✔Acceptance or rejection is independent of the acceptance or rejection of
| | | | | | | | | | |
other projects.
| |
, What does it mean when a project is mutually exclusive? - correct answer
| | | | | | | | | | | |
✔Can accept "A" or you can accept "B" or you can reject both of them, but
| | | | | | | | | | | | | | | |
cannot accept both of them.
| | | | |
Payback Period - correct answer ✔the number of periods (usually measured in
| | | | | | | | | | |
years) required for the sum of the project's expected cash flows to equal its
| | | | | | | | | | | | | |
initial cash outlay. In other words, the payback period is the time it takes for a
| | | | | | | | | | | | | | | |
firm to recover its initial investment.
| | | | | |
Internal Rate of Return - correct answer ✔the discount rate that makes the
| | | | | | | | | | | |
|NPV of an investment zero
| | | |
Profitability Index - correct answer ✔The present value of an investment's
| | | | | | | | | |
future cash flows divided by its initial cost. Also called benefit/cost ratio.
| | | | | | | | | | | |
What are problems with multiple IRRs? - correct answer ✔multiple IRRs can
| | | | | | | | | | |
exist; scaling (decisions differ in scale) and timing
| | | | | | | |
Crossover Rate - correct answer ✔the cost of capital at which the net present
| | | | | | | | | | | | |
values of two projects are equal
| | | | | |
When will NPV and IRR not give the same decision? - correct answer ✔when
| | | | | | | | | | | | |
cash flow signs change more than once and when projects are mutually
| | | | | | | | | | | |
exclusive
|
