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 […]
The initial outlay or cost is $1,000,000 for a four-year project. The respective future cash inflows for years 1, 2, 3 and 4 are: $500,000, $300,000, $300,000 and $300,000. What is the payback period without discounting cash flows? A) About 2.50 years B) About 2.67 years C) About 3.67 years D) About 4.50 years […]
The ________ model determines at what point in time cash outflow is recovered by the corresponding future cash inflow. A) NPV B) buyback C) net present value D) payback period ANSWER Answer: D
In pledging accounts receivable, the percentage advanced against the adjusted collateral is determined by the borrower based on its overall evaluation on the quality of the acceptable receivables and the expected cost of the liquidation. Indicate whether the statement is true or false ANSWER FALSE
The initial outlay or cost for a four-year project is $1,000,000. The respective cash inflows for years 1, 2, 3 and 4 are: $500,000, $300,000, $300,000 and $300,000. What is the discounted payback period if the discount rate is 10%? A) About 2.67 years B) About 3.35 years C) About 3.67 years D) About 4.50 […]
Which category of composite assets (for public U.S. nonfinancial firms) showed the largest proportional decrease over the years 1980-2000? a. cash and equivalents b. inventories c. net PP&E d. other non-current assets ANSWER C
Which of the statements below is TRUE of the payback period method? A) It ignores the cash flow after the initial outflow has been recovered. B) It is biased against projects with early-term payouts. C) It incorporates time-value-of-money principles. D) It focuses on cash flows after the initial outflow has been recovered. ANSWER […]
A firm has EBIT of $375,000, interest expense of $75,000, preferred dividends of $6,000 and a tax rate of 40 percent. The firm’s degree of financial leverage at a base EBIT level of $375,000 is ________. A) 0.97 B) 1.29 C) 1.27 D) 1.09 ANSWER B
Throughout the period 1980-2000, the composite proportion of the TA of U.S. nonfinancial firms accounted for by net PP&E generally (i)_, and the proportion of TA financed by equity (ii) fairly steadily. (i) (ii) a. decreased increased b. increased decreased c. increased also increased d. decreased also decreased ANSWER B
A company usually establishes a short, arbitrary cutoff date for handling the initial screening of many small-dollar opportunities. Indicate whether the statement is true or false. ANSWER Answer: TRUE
