BA 318 Final Exam questions with
complete solutions
Goal of a financial manager - correct answer ✔✔ Maximize value for shareholders
Excess cash flow - correct answer ✔✔ Pay dividends (DDM)
Reinvest in projects
Capital Budgeting - correct answer ✔✔ Calculating the cash flows that go into NPV to determine
whether or not to accept a project
Net Present Value - correct answer ✔✔ A dollar measure of an investment's effect on the value
of a company's assets
Net Present Value - correct answer ✔✔ Capital structure decisions do not matter, previous
financing decisions do not affect the decision. Managers do not have the option to be flexible
when using this method.
Accept - correct answer ✔✔ If NPV is positive you should _________ the project?
net present value of zero - correct answer ✔✔ is earning a return that exactly matches the
requirement.
Internal Rate of Return - correct answer ✔✔ The discount rate that causes the net present value
of a project to equal zero is called the:
, Accept - correct answer ✔✔ If the IRR exceeds the specified benchmark (discount rate) you
should _________?
Payback Period - correct answer ✔✔ The time it takes to get our money back?
time value of money - correct answer ✔✔ Payback ignores ___________?
Profitability index - correct answer ✔✔ Present value of an investment's future cash flows
divided by its initial cost (benefit cost-ratio)
Profitability Index - correct answer ✔✔ What tells us the value created per dollar invested?
one - correct answer ✔✔ Accept the profitability index if it is greater than what?
Operating Cash Flow - correct answer ✔✔ Revenues from the project
Operating costs
Taxes
tax effects of depreciation
Incremental overhead and administrative costs the project creates
Depreciation - correct answer ✔✔ ________________ reduces a firm's taxable income
Networking Capital - correct answer ✔✔ Sales a purchases on credit
Changes in inventory
Reserves of cash
Networking capital - correct answer ✔✔ Current Assets- Current Liabilities
complete solutions
Goal of a financial manager - correct answer ✔✔ Maximize value for shareholders
Excess cash flow - correct answer ✔✔ Pay dividends (DDM)
Reinvest in projects
Capital Budgeting - correct answer ✔✔ Calculating the cash flows that go into NPV to determine
whether or not to accept a project
Net Present Value - correct answer ✔✔ A dollar measure of an investment's effect on the value
of a company's assets
Net Present Value - correct answer ✔✔ Capital structure decisions do not matter, previous
financing decisions do not affect the decision. Managers do not have the option to be flexible
when using this method.
Accept - correct answer ✔✔ If NPV is positive you should _________ the project?
net present value of zero - correct answer ✔✔ is earning a return that exactly matches the
requirement.
Internal Rate of Return - correct answer ✔✔ The discount rate that causes the net present value
of a project to equal zero is called the:
, Accept - correct answer ✔✔ If the IRR exceeds the specified benchmark (discount rate) you
should _________?
Payback Period - correct answer ✔✔ The time it takes to get our money back?
time value of money - correct answer ✔✔ Payback ignores ___________?
Profitability index - correct answer ✔✔ Present value of an investment's future cash flows
divided by its initial cost (benefit cost-ratio)
Profitability Index - correct answer ✔✔ What tells us the value created per dollar invested?
one - correct answer ✔✔ Accept the profitability index if it is greater than what?
Operating Cash Flow - correct answer ✔✔ Revenues from the project
Operating costs
Taxes
tax effects of depreciation
Incremental overhead and administrative costs the project creates
Depreciation - correct answer ✔✔ ________________ reduces a firm's taxable income
Networking Capital - correct answer ✔✔ Sales a purchases on credit
Changes in inventory
Reserves of cash
Networking capital - correct answer ✔✔ Current Assets- Current Liabilities
