WGU D076 FINANCE SKILLS FOR
MANAGERS MODULE 11 CORRECT
100%
ANSWERall the cash flows in the project, the timing of cash flows, and the cost of
capital or risk of the project
Why is it important to consider all relevant cash flows in an ideal evaluation method for
capital investment? - ANSWERWithout considering every cash flow of a potential
project, you do not know how the project will enhance the value of a firm
Talia is comparing four mutually exclusive projects. In order to choose the best project
to optimize the goal of the firm, which capital budgeting method should Talia use? -
ANSWERNet present value (NPV)
Alphabet Co. has $50,000 to spend on capital investment projects for the next year. It
will do as many projects as it has cash for. Alphabet Co. calculates the potential
incremental cash flows and costs of the projects as well as the NPV, IRR, and PI for
each project. How should the company decide which projects to invest in if it wants to
maximize the total amount of value created? - ANSWERIt should choose the projects
with the highest PIs until all capital has been used
What is opportunity cost as it relates to the time value of money? - ANSWERIt is the
opportunity you forgo to invest in other options due to the time scope of an investment
Why is the timing of cash flows an important characteristic of capital investment? -
ANSWERTiming of cash flows is related to the opportunity cost associated with those
cash flows
Why is there always a cost for bringing funds into a business? - ANSWERA business
must compensate investors for the risk that they are taking to invest in the business
What is the relationship between the risk and the rate of return? - ANSWERThe higher
the risk investors have to take on, the higher return they require
How do corporations and purchasers of financial securities view returns? -
ANSWERPurchasers of financial securities look at returns as the amount of money they
require in order to lend or give their money to the corporation that issued those
securities
MANAGERS MODULE 11 CORRECT
100%
ANSWERall the cash flows in the project, the timing of cash flows, and the cost of
capital or risk of the project
Why is it important to consider all relevant cash flows in an ideal evaluation method for
capital investment? - ANSWERWithout considering every cash flow of a potential
project, you do not know how the project will enhance the value of a firm
Talia is comparing four mutually exclusive projects. In order to choose the best project
to optimize the goal of the firm, which capital budgeting method should Talia use? -
ANSWERNet present value (NPV)
Alphabet Co. has $50,000 to spend on capital investment projects for the next year. It
will do as many projects as it has cash for. Alphabet Co. calculates the potential
incremental cash flows and costs of the projects as well as the NPV, IRR, and PI for
each project. How should the company decide which projects to invest in if it wants to
maximize the total amount of value created? - ANSWERIt should choose the projects
with the highest PIs until all capital has been used
What is opportunity cost as it relates to the time value of money? - ANSWERIt is the
opportunity you forgo to invest in other options due to the time scope of an investment
Why is the timing of cash flows an important characteristic of capital investment? -
ANSWERTiming of cash flows is related to the opportunity cost associated with those
cash flows
Why is there always a cost for bringing funds into a business? - ANSWERA business
must compensate investors for the risk that they are taking to invest in the business
What is the relationship between the risk and the rate of return? - ANSWERThe higher
the risk investors have to take on, the higher return they require
How do corporations and purchasers of financial securities view returns? -
ANSWERPurchasers of financial securities look at returns as the amount of money they
require in order to lend or give their money to the corporation that issued those
securities
