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AGB 310 Final Exam Questions and Correct Answers
| Latest Update
Installation and shipping costs are not considered part of the initial cost
of acquiring the asset. Ans: False
The book value of an asset is equal to the Ans: purchase price minus
accumulated depreciation.
The sale of an ordinary asset for its book value results in Ans: no tax
benefit.
Assignment Expert
The relevant cash flows for capital budgeting analysis are Ans:
incremental cash flows.
Guru01 - Stuvia
Which of the following statements is true? Ans: -**Operating cash flow
(OCF) is calculated by adding back depreciation to the net operating
profit after taxes.**
2026
-When the sale of an asset is equal to its book value, a firm will have to
pay taxes.
©
-Annual cash inflows are the same as accounting earnings.
-The book value of an asset is equal to the asset's after-tax proceeds,
provided after the asset has been sold.
Which of the following statements is true? Ans: -NOPAT is the same as
Net Income.
-**Projects will usually have an initial investment, cash inflows, and a
terminal cash flow.**
-When calculating the cash flows for a project, we should include interest
payments.
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-Net working capital is the amount by which a firm's current assets
exceed its current liabilities.
Payback Period Ans: This criterion tells the analyst how long it will take
for an investment to earn back the initial investment but doesn't account
for the time value of money.
Modified Internal Rate of Return (MIRR) Ans: This criterion tells the
analyst the average rate of return that the investment earns and assumes
proceeds are reinvested at a separate reinvestment rate.
Profitability Index Ans: This ratio compares the present value of the
Assignment Expert
investment proceeds to the initial investment cost.
Which of the following is a flaw of the payback period as a metric in
Guru01 - Stuvia
capital budgeting analysis? Ans: -The payback period is too hard to
calculate.
-The payback period assumes that cash flows are reinvested at the IRR,
2026
which overstates the profitability of projects.
©
-**The payback period does not apply a discount rate to cash flows
received in the future.**
-The payback period is difficult to understand and explain.
All of the following are steps in the capital budgeting process EXCEPT:
Ans: -**The pre-audit.**
-evaluating opportunities.
-identifying opportunities.
-implementing the project.
An advantage of the net present value (NPV) method is that it: Ans: -does
not employ time value of money techniques.
AGB 310 Final Exam Questions and Correct Answers
| Latest Update
Installation and shipping costs are not considered part of the initial cost
of acquiring the asset. Ans: False
The book value of an asset is equal to the Ans: purchase price minus
accumulated depreciation.
The sale of an ordinary asset for its book value results in Ans: no tax
benefit.
Assignment Expert
The relevant cash flows for capital budgeting analysis are Ans:
incremental cash flows.
Guru01 - Stuvia
Which of the following statements is true? Ans: -**Operating cash flow
(OCF) is calculated by adding back depreciation to the net operating
profit after taxes.**
2026
-When the sale of an asset is equal to its book value, a firm will have to
pay taxes.
©
-Annual cash inflows are the same as accounting earnings.
-The book value of an asset is equal to the asset's after-tax proceeds,
provided after the asset has been sold.
Which of the following statements is true? Ans: -NOPAT is the same as
Net Income.
-**Projects will usually have an initial investment, cash inflows, and a
terminal cash flow.**
-When calculating the cash flows for a project, we should include interest
payments.
, 2 for specific request mail
-Net working capital is the amount by which a firm's current assets
exceed its current liabilities.
Payback Period Ans: This criterion tells the analyst how long it will take
for an investment to earn back the initial investment but doesn't account
for the time value of money.
Modified Internal Rate of Return (MIRR) Ans: This criterion tells the
analyst the average rate of return that the investment earns and assumes
proceeds are reinvested at a separate reinvestment rate.
Profitability Index Ans: This ratio compares the present value of the
Assignment Expert
investment proceeds to the initial investment cost.
Which of the following is a flaw of the payback period as a metric in
Guru01 - Stuvia
capital budgeting analysis? Ans: -The payback period is too hard to
calculate.
-The payback period assumes that cash flows are reinvested at the IRR,
2026
which overstates the profitability of projects.
©
-**The payback period does not apply a discount rate to cash flows
received in the future.**
-The payback period is difficult to understand and explain.
All of the following are steps in the capital budgeting process EXCEPT:
Ans: -**The pre-audit.**
-evaluating opportunities.
-identifying opportunities.
-implementing the project.
An advantage of the net present value (NPV) method is that it: Ans: -does
not employ time value of money techniques.
