ACG 2071 FSU FINAL LATEST
EXAM
capital budgeting - ANSWERS-when companies have to make super
long term decisions where they need to dump a lot of money into a
building or project
discounted cash flow models - ANSWERS-in order to determine if a
project is worthwhile, companies must look at the money coming in and
money going out for a project over time
- money that the project makes is a CASH INFLOW +
- money that must be spent on the project is CASH OUTFLOW -
since cash flows happen at different points in time and we cannot
directly compare cash flows in the future to money cash flows today as
they do not match up, we compare these cash flows to each other by
__________ - ANSWERS-discounting future cash flows back to today
and computing NPV
Net Present Value (NPV) = - ANSWERS-present value of future cash
flows - net investment
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PAGE
1
, ACG 2071 FSU FINAL LATEST
EXAM
net present value (NPV) discounts cash flows back using an INTEREST
RATE, also called... - ANSWERS-cost of capital
borrowing costs
discount rate
desired return on invested capital
desired ROI
hurdle rate
NPV is a measure of __________, so __________ is better -
ANSWERS-profitability
bigger is better
the NPV rule - ANSWERS-if a project's NPV is POSITIVE, firms will
likely ACCEPT the project
if a project's NPV is NEGATIVE, firms will likely REJECT the project
annuity vs single sum (why?) - ANSWERS-when discounting cash
flows, we use different tables under different circumstances
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PAGE
2
, ACG 2071 FSU FINAL LATEST
EXAM
PV of annuity is used when... - ANSWERS-there is the SAME amount
of money for every period
the table will discount back all of the future cash flows AT ONCE
PV of $1 / single sum is used when... - ANSWERS-there are
DIFFERENT amounts of money in any time period
the table will discount back the future cash flows ONE BY ONE
3 types of questions using NPV - ANSWERS-- only using annuity table
- only using single sum / $1 table
- using BOTH SS & A tables
internal rate of return
END OF
PAGE
3
EXAM
capital budgeting - ANSWERS-when companies have to make super
long term decisions where they need to dump a lot of money into a
building or project
discounted cash flow models - ANSWERS-in order to determine if a
project is worthwhile, companies must look at the money coming in and
money going out for a project over time
- money that the project makes is a CASH INFLOW +
- money that must be spent on the project is CASH OUTFLOW -
since cash flows happen at different points in time and we cannot
directly compare cash flows in the future to money cash flows today as
they do not match up, we compare these cash flows to each other by
__________ - ANSWERS-discounting future cash flows back to today
and computing NPV
Net Present Value (NPV) = - ANSWERS-present value of future cash
flows - net investment
END OF
PAGE
1
, ACG 2071 FSU FINAL LATEST
EXAM
net present value (NPV) discounts cash flows back using an INTEREST
RATE, also called... - ANSWERS-cost of capital
borrowing costs
discount rate
desired return on invested capital
desired ROI
hurdle rate
NPV is a measure of __________, so __________ is better -
ANSWERS-profitability
bigger is better
the NPV rule - ANSWERS-if a project's NPV is POSITIVE, firms will
likely ACCEPT the project
if a project's NPV is NEGATIVE, firms will likely REJECT the project
annuity vs single sum (why?) - ANSWERS-when discounting cash
flows, we use different tables under different circumstances
END OF
PAGE
2
, ACG 2071 FSU FINAL LATEST
EXAM
PV of annuity is used when... - ANSWERS-there is the SAME amount
of money for every period
the table will discount back all of the future cash flows AT ONCE
PV of $1 / single sum is used when... - ANSWERS-there are
DIFFERENT amounts of money in any time period
the table will discount back the future cash flows ONE BY ONE
3 types of questions using NPV - ANSWERS-- only using annuity table
- only using single sum / $1 table
- using BOTH SS & A tables
internal rate of return
END OF
PAGE
3
