Allied, Inc. is considering Project A and Project B, which are two mutually exclusive projects with unequal lives. Project A is an eight-year project that has an initial outlay or cost of $180,000. Its future cash inflows for years 1 through 8 are $38,000. Project B is a six-year project that has an initial outlay […]
The net present value of an investment is ________. A) the present value of all benefits (cash inflows) B) the present value of all benefits (cash inflows) minus the present value of all costs (cash outflows) of the project C) the present value of all costs (cash outflows) of the project D) the present value […]
There are two ways to correct for projects with unequal lives when using the NPV approach. Which of the answers below is one of these ways? A) One way is to find a common life, without the need to extend the projects to the least common multiple of their lives. B) One way is to […]
Which of the following may be TRUE regarding mutually exclusive capital budgeting projects? A) There is need for only one project, and both projects can fulfill that current need. B) By using funds for one project, there are not enough funds available for the other project. C) There is a scarce resource that both projects […]
Projects are mutually exclusive if picking one project eliminates the ability to pick the other project. This mutually exclusive situation can arise for different reasons. Which of the statements below is NOT one of these reasons? A) One project will always have a negative NPV. B) There is a scarce resource that both projects would […]
Factoring accounts receivable is relatively an inexpensive source of unsecured short-term funds that allows firms to turn accounts receivable immediately into cash. Indicate whether the statement is true or false ANSWER FALSE
Which groups of U.S. nonfinancial firms have the highest composite proportions of PP&E to TA? a. S&P Industrials b. S&P MidCaps c. S&P SmallCaps d. S&P Transports and Utilities ANSWER D
Factoring accounts receivable is relatively an expensive source of secured short-term funds that allows firms to turn accounts receivable immediately into cash. Indicate whether the statement is true or false ANSWER TRUE
Dweller, Inc. is considering a four-year project that has an initial after-tax outlay or after-tax cost of $80,000. The future cash inflows from its project are $40,000, $40,000, $30,000 and $30,000 for years 1, 2, 3 and 4, respectively. Dweller uses the net present value method and has a discount rate of 12%. Will Dweller […]
Rogue River, Inc. is considering a project that has an initial after-tax outlay or after-tax cost of $220,000. The respective future cash inflows from its four-year project for years 1 through 4 are: $50,000, $60,000, $70,000 and $80,000. Rogue River uses the net present value method and has a discount rate of 11%. Will Rogue […]
