FIN 300 final || Answers 100% Rated Correct.
When two projects are mutually exclusive, accepting one project implicitly eliminates the other.
correct answers True
Projects that are classified as contingent could be mandatory or optional projects correct answers
True
Capital rationing refers to the limiting of capital resources to underperforming divisions correct
answers False
In computing the NPV of a capital budgeting project, one should NOT
A) Make a decision based on the project's NPV
B) Ignore the salvage value
C) Estimate the cost of the project
D) Discount the future cash flows over the project's expected life correct answers ignore the
salvage value
Which of the following is true about the Net Present Value Method:
A) The NPV assumes that all cash flows are reinvested at the firm's discount rate
B) The NPV allows projects to be ranked by rate of return
C) The NPV does not utilize time value of money
D) The NPV is a rate of return that is acceptable to the firm correct answers A) The NPV
assumes that all cash flows are reinvested at the firm's discount rate
Capital budgeting is the process of:
A) Determining how much capital a firm should raise
B) Determining how much debt a firm should budget for in its capital structure
C) Determining which capital investments a firm should make
,D) Keeping track of all the revenues and expenses incurred by a firm during the year correct
answers C) Determining which capital investments a firm should make
Which of the following is true of capital budgeting decisions:
A) They create value for a firm when the value of the selected productive assets is worth more
than their costs
B) They can involve substantial cash outlays, which once made are not easily reversed
C) They define a firm's lines of business and its inherent business risk
D) All of these correct answers D) All of these
The capital budgeting process starts with a firm's
A) Financial plan
B) Sales forecast
C) Business plan
D) Strategic plan correct answers D) Strategic plan (Which spells out its strategy for the next
three to five years)
The valuation of real assets is less straightforward than the valuation of financial assets correct
answers True
The net present value of a project equals the value of the assets used in the project correct
answers False (The net present value of a project equals the difference between the present value
of its cost and the present value of its expected cash flows.)
Which of the following represents an example of key reasons for making capital expenditures?
A) Replacing production equipment
B) Floating a corporate bond issue
C) Replacing a key executive of a firm
D) Changing the capital structure of a firm correct answers A) Replacing production equipment
, The cost of capital for a project is its return on equity correct answers False (The cost of capital
is the rate of return that a capital project must earn to be accepted by management)
If you start with incremental net operating profits after tax (NOPAT) and add depreciation and
amortization to it, you will obtain incremental cash flows from operations correct answers True
Accounting earnings are a reliable measure of the costs and benefits of a project correct answers
False
If taken without accompanying changes in cash flow, changes in a company's accounting
earnings do not impact the overall value of the firm correct answers True
The research and development costs to date of a project should be considered when analyzing the
cash flows of a prospective project correct answers False
Since our perspective when evaluating a project is that of all the shareholders only, then we
should evaluate the after-tax cash flows produced by a project correct answers True
a progressive tax system means that a taxpayer will pay a higher tex rate for a given dollar of
earnings for every successive year correct answers False
It is possible for a firm to have one depreciation schedule for tax purposes and another for
financial reporting purposes correct answers True
[Blank] refers to the cash flow that a project is expected to generate after all operating expenses
and taxes have been paid correct answers Incremental cash flow from operations
The idea that we can evaluate the cash flows from a project independently of the cash flows for
the firm is known as: correct answers The stand-alone principle
When two projects are mutually exclusive, accepting one project implicitly eliminates the other.
correct answers True
Projects that are classified as contingent could be mandatory or optional projects correct answers
True
Capital rationing refers to the limiting of capital resources to underperforming divisions correct
answers False
In computing the NPV of a capital budgeting project, one should NOT
A) Make a decision based on the project's NPV
B) Ignore the salvage value
C) Estimate the cost of the project
D) Discount the future cash flows over the project's expected life correct answers ignore the
salvage value
Which of the following is true about the Net Present Value Method:
A) The NPV assumes that all cash flows are reinvested at the firm's discount rate
B) The NPV allows projects to be ranked by rate of return
C) The NPV does not utilize time value of money
D) The NPV is a rate of return that is acceptable to the firm correct answers A) The NPV
assumes that all cash flows are reinvested at the firm's discount rate
Capital budgeting is the process of:
A) Determining how much capital a firm should raise
B) Determining how much debt a firm should budget for in its capital structure
C) Determining which capital investments a firm should make
,D) Keeping track of all the revenues and expenses incurred by a firm during the year correct
answers C) Determining which capital investments a firm should make
Which of the following is true of capital budgeting decisions:
A) They create value for a firm when the value of the selected productive assets is worth more
than their costs
B) They can involve substantial cash outlays, which once made are not easily reversed
C) They define a firm's lines of business and its inherent business risk
D) All of these correct answers D) All of these
The capital budgeting process starts with a firm's
A) Financial plan
B) Sales forecast
C) Business plan
D) Strategic plan correct answers D) Strategic plan (Which spells out its strategy for the next
three to five years)
The valuation of real assets is less straightforward than the valuation of financial assets correct
answers True
The net present value of a project equals the value of the assets used in the project correct
answers False (The net present value of a project equals the difference between the present value
of its cost and the present value of its expected cash flows.)
Which of the following represents an example of key reasons for making capital expenditures?
A) Replacing production equipment
B) Floating a corporate bond issue
C) Replacing a key executive of a firm
D) Changing the capital structure of a firm correct answers A) Replacing production equipment
, The cost of capital for a project is its return on equity correct answers False (The cost of capital
is the rate of return that a capital project must earn to be accepted by management)
If you start with incremental net operating profits after tax (NOPAT) and add depreciation and
amortization to it, you will obtain incremental cash flows from operations correct answers True
Accounting earnings are a reliable measure of the costs and benefits of a project correct answers
False
If taken without accompanying changes in cash flow, changes in a company's accounting
earnings do not impact the overall value of the firm correct answers True
The research and development costs to date of a project should be considered when analyzing the
cash flows of a prospective project correct answers False
Since our perspective when evaluating a project is that of all the shareholders only, then we
should evaluate the after-tax cash flows produced by a project correct answers True
a progressive tax system means that a taxpayer will pay a higher tex rate for a given dollar of
earnings for every successive year correct answers False
It is possible for a firm to have one depreciation schedule for tax purposes and another for
financial reporting purposes correct answers True
[Blank] refers to the cash flow that a project is expected to generate after all operating expenses
and taxes have been paid correct answers Incremental cash flow from operations
The idea that we can evaluate the cash flows from a project independently of the cash flows for
the firm is known as: correct answers The stand-alone principle
