What is an incremental cash flow for a project? What concepts do we need to examine to help understand how to estimate the incremental cash flow of a project? What else is needed for deciding whether or not to choose a project? What will be an ideal response? ANSWER Answer: The incremental cash […]
Date: September 19th, 2020
The output of the capital budgeting decision models is only as good as the inputs that go into them. Indicate whether the statement is true or false. ANSWER Answer: TRUE
Date: September 19th, 2020
The six financial decision models that you studied in Chapter 9 are valid only if one has the proper incremental cash flow for the project under consideration. Indicate whether the statement is true or false. ANSWER Answer: TRUE
Date: September 19th, 2020
If an asset’s disposal value is greater than its current book value, a gain on disposal occurs. Indicate whether the statement is true or false. ANSWER Answer: TRUE
Date: September 19th, 2020
The ________ is the cost of each financing component multiplied by that component’s percent of the total funding amount. A) NPV B) IRR C) cost of capital D) cost of debt ANSWER Answer: C
Date: September 19th, 2020
Which of the following is a basic source of capital for a firm? A) short-term debt B) discounts from suppliers C) current liabilities D) common stock ANSWER D
Date: September 19th, 2020
A decrease in fixed financial costs will result in a(n)________. A) increase in financial risk B) decrease in financial risk C) increase in operating leverage D) decrease in operating leverage ANSWER B
Date: September 19th, 2020
A financial manager examines concepts such as sunk costs, opportunity costs, and erosion costs to help understand how to estimate the incremental cash flow of a project, which is ________. A) the extra money the firm pays from taking on more inventory B) the additional money the firm receives from taking on a new project […]
Date: September 19th, 2020
Which of the following is true of current assets? A) The time of conversion of current assets to more liquid form is relatively unpredictable. B) They are used to fund long-term operations and pay long-term expenses. C) They are more profitable because they add more value to the product than that provided by fixed assets. […]
Date: September 19th, 2020
The building of the ________ cash flow of a project is the cornerstone of the financial decision models. A) depreciation B) incremental C) accounting D) tax ANSWER Answer: B
Date: September 19th, 2020
