FIN 306 Multiple Choice Exam | Questions and Answers | 2025 Update | 100% Correct.
Relevant cash flows for a project are best described as .
A.incremental cash flows
B.incidental cash flows
C.contingent cash flows
D.sunk cash flows
A.
projects have the same function; the acceptance of one the others from
consideration.
A. Capital; eliminates
B.Mutually exclusive; eliminates
C.Replacement; eliminates
D.Independent; does not eliminate
B.
When determining the after-tax cost of a bond, the face value of the issue must be adjusted to the net
proceeds amounts by considering .
A. the flotation costs
B. the taxes
C. the approximate returns
D. the risks
A.
What is IRR of the following stream of cash flows?
Year CF
0 -$40,000
1 10,000
2 8,000
3 6,500
,4 4,500
5 10,000
A. 10%
B. 8%
C. -5.50%
D. -0.86%
D.
A corporation is considering expanding operations to meet growing demand. With the capital expansion,
the current accounts are expected to change. Management expects cash to increase by $20,000,
accounts receivable by $40,000, and inventories by $60,000. At the same time accounts payable will
increase by $50,000, accruals by $10,000, and long minus−term debt by $100,000. The change in net
working capital is .
A. an increase of $120,000
B. a decrease of $120,000
C. an increase of $60,000
D. a decrease of $60,000
D.
In order to recognize the interrelationship between financing and investments, a firm should use
when evaluating an investment.
A. the weighted average cost of all financing sources
B. the current opportunity cost
C. the most costly source of financing
D. the least costly source of financing
A.
, The approach is used to convert the net present value of unequal−lived projects into an
equivalent annual amount (in net present value terms).
A. internal rate of return
B. annualized net present value
C. investment opportunities schedule
D. risk-adjusted discount rate
B.
A conventional cash flow pattern associated with capital investment projects consists of an initial
.
A. outflow followed by a series of outflows
B. outflow followed by a series of inflows
C. inflow followed by a broken series of outlay
D. outflow followed by a broken cash series
B.
Tangshan Mining Company is considering investing in one of two mutually exclusive projects M and N
which are described below. Tangshan Mining's overall cost of capital is 15 percent, the market return is
15 percent and the risk-free rate is 5 percent. Tangshan estimates that the beta for project M is 1.20 and
the beta for project N is 1.40. Tangshan Mining Company is considering investment in one of two
mutually exclusive projects M and N which are described below. Tangshan Mining's overall cost of capital
is 15 percent, the market return is 15 percent and the risk-free rate is 5 percent. Tangshan estimates that
the beta for project M is 1.20 and the beta for project N is 1.40.
Relevant cash flows for a project are best described as .
A.incremental cash flows
B.incidental cash flows
C.contingent cash flows
D.sunk cash flows
A.
projects have the same function; the acceptance of one the others from
consideration.
A. Capital; eliminates
B.Mutually exclusive; eliminates
C.Replacement; eliminates
D.Independent; does not eliminate
B.
When determining the after-tax cost of a bond, the face value of the issue must be adjusted to the net
proceeds amounts by considering .
A. the flotation costs
B. the taxes
C. the approximate returns
D. the risks
A.
What is IRR of the following stream of cash flows?
Year CF
0 -$40,000
1 10,000
2 8,000
3 6,500
,4 4,500
5 10,000
A. 10%
B. 8%
C. -5.50%
D. -0.86%
D.
A corporation is considering expanding operations to meet growing demand. With the capital expansion,
the current accounts are expected to change. Management expects cash to increase by $20,000,
accounts receivable by $40,000, and inventories by $60,000. At the same time accounts payable will
increase by $50,000, accruals by $10,000, and long minus−term debt by $100,000. The change in net
working capital is .
A. an increase of $120,000
B. a decrease of $120,000
C. an increase of $60,000
D. a decrease of $60,000
D.
In order to recognize the interrelationship between financing and investments, a firm should use
when evaluating an investment.
A. the weighted average cost of all financing sources
B. the current opportunity cost
C. the most costly source of financing
D. the least costly source of financing
A.
, The approach is used to convert the net present value of unequal−lived projects into an
equivalent annual amount (in net present value terms).
A. internal rate of return
B. annualized net present value
C. investment opportunities schedule
D. risk-adjusted discount rate
B.
A conventional cash flow pattern associated with capital investment projects consists of an initial
.
A. outflow followed by a series of outflows
B. outflow followed by a series of inflows
C. inflow followed by a broken series of outlay
D. outflow followed by a broken cash series
B.
Tangshan Mining Company is considering investing in one of two mutually exclusive projects M and N
which are described below. Tangshan Mining's overall cost of capital is 15 percent, the market return is
15 percent and the risk-free rate is 5 percent. Tangshan estimates that the beta for project M is 1.20 and
the beta for project N is 1.40. Tangshan Mining Company is considering investment in one of two
mutually exclusive projects M and N which are described below. Tangshan Mining's overall cost of capital
is 15 percent, the market return is 15 percent and the risk-free rate is 5 percent. Tangshan estimates that
the beta for project M is 1.20 and the beta for project N is 1.40.
