NEW 2022 UPDATE FNAN 522: FINAL EXAM ALL EXAM QUESTIONS AND CORRECT ANSWER

NEW 2022 UPDATE FNAN 522: FINAL EXAM ALL EXAM QUESTIONS AND CORRECT ANSWER 1. Since the focus of capital budgeting is cash flows, changes in non-cash accounts such as depreciation and working capital would not be relevant to the analysis. True of false. - CORRECT ANSWER False. 2. The most important advantage of the NPV approach is that it is the most theoretical correct method. True or False. - CORRECT ANSWER True. 3. Relevant financial data for a project are best described as a) EBDT, b) incremental cash flows, c) incremental profits, or d) accounting cash flows - CORRECT ANSWER b) incremental cash flows 4. The change in net working capital when evaluating a capital budgeting decision is... - CORRECT ANSWER ...changes in current assets minus the change in current liabilities 5. Some firms use the payback period as a decision criterion or as a supplement to sophisticated decision making techniques because.... - CORRECT ANSWER ...it can be viewed as a measure of risk exposure 6. In the context of capital budgeting, risk refers to... - CORRECT ANSWER ...the degree of variability of the cash inflows 7. One advantage of the NPV approach is that it always provides the right answer. True or false. - CORRECT ANSWER True. 8. Mutually exclusive projects are projects whose cash flows are related to one another, the acceptance of one does eliminate the others from further considerations. True or false. - CORRECT ANSWER True. 9. Which of the following would decrease the NPV of a project being considered: a) an increase in the cost of capital (discount rate), b) the sale of a machine at a capital gain rather than book value, c) an initial required decrease in net working capital, or d) a lowering of the tax rate - CORRECT ANSWER a) an increase in th