Question 1

Selecting the lowest cost technology:

Accepted Answer

A) will result in the highest long-run NPV. 
B) could rule out future flexibility. 
C) will minimize the cost of future upgrades. 
D) may not permit future expansion. 
A) will result in the highest long-run NPV. 
B) could rule out future flexibility. 
C) will minimize the cost of future upgrades. 
D) may not permit future expansion.

Question 2

A project that breaks even in accounting terms will surely have a negative NPV.

Accepted Answer

A) True 
 B)False

Question 3

Calculate the NPV break-even level of sales for a project requiring an investment of $3,000,000 and providing as cash flows:.15 × sales less $250,000.Assume the project will generate these cash flows for 10 years and that the discount rate is 10 percent.

Accepted Answer

A) $3,254,890 
B) $3,504,890 
C) $4,921,549 
D) $19,686,667 
A) $3,254,890 
B) $3,504,890 
C) $4,921,549 
D) $19,686,667

Question 4

Conflicts of interest between shareholders and managers may result in the sacrifice of attractive capital budgeting proposals.

Accepted Answer

A) True 
 B)False

Question 5

Discuss the basic difference between an accounting break-even point analysis and an NPV break-even analysis.Which would you consider more reliable? Which would you consider more common? Why?

Accepted Answer

An accounting break-even analysis focuse

Question 6

How much depreciation expense exists in a firm that has a break-even level of revenues of $2 million, fixed costs of $400,000, and a 60 percent ratio of variable costs to sales?

Accepted Answer

A) $144,000 
B) $266,667 
C) $400,000 
D) $666,667 
A) $144,000 
B) $266,667 
C) $400,000 
D) $666,667

Question 7

Fixed costs:

Accepted Answer

A) are a constant percentage of sales revenues. 
B) vary with the level of depreciation expense. 
C) are constant with changes in the level of output. 
D) are inversely related to the level of output. 
A) are a constant percentage of sales revenues. 
B) vary with the level of depreciation expense. 
C) are constant with changes in the level of output. 
D) are inversely related to the level of output.

Question 8

The inputs that are most worth refining before you commit to a project are the ones that have the greatest potential to alter project NPV.

Accepted Answer

A) True 
 B)False

Question 9

What happens to the NPV of a one-year project if fixed costs are increased from $400 to $600, the firm is not profitable, has a 15% tax rate and employs a 12% cost of capital?

Accepted Answer

A) NPV decreases by $200.00 
B) NPV decreases by $178.57 
C) NPV decreases by $130.00 
D) NPV decreases by $113.04 
A) NPV decreases by $200.00 
B) NPV decreases by $178.57 
C) NPV decreases by $130.00 
D) NPV decreases by $113.04

Selecting the lowest cost technology:

A project that breaks even in accounting terms will surely have a negative NPV.

Calculate the NPV break-even level of sales for a project requiring an investment of $3,000,000 and providing as cash flows:.15 × sales less $250,000.Assume the project will generate these cash flows for 10 years and that the discount rate is 10 percent.

Conflicts of interest between shareholders and managers may result in the sacrifice of attractive capital budgeting proposals.

Discuss the basic difference between an accounting break-even point analysis and an NPV break-even analysis.Which would you consider more reliable? Which would you consider more common? Why?

How much depreciation expense exists in a firm that has a break-even level of revenues of $2 million, fixed costs of $400,000, and a 60 percent ratio of variable costs to sales?

Fixed costs:

The inputs that are most worth refining before you commit to a project are the ones that have the greatest potential to alter project NPV.

What happens to the NPV of a one-year project if fixed costs are increased from $400 to $600, the firm is not profitable, has a 15% tax rate and employs a 12% cost of capital?

Goals and Governance of the Firm

Financial Markets and Institutions

Accounting and Finance

Measuring Corporate Performance

The Time Value of Money

Valuing Bonds

Valuing Stocks

Net Present Value and Other Investment Criteria

Using Discounted Cash Flow Analysis to Make Investment Decisions

Introduction to Risk, Return, and the Opportunity Cost of Capital

Risk, Return, and Capital Budgeting

The Weighted-Average Cost of Capital and Company Valuation

Introduction to Corporate Financing and Governance

Venture Capital, Ipos, and Seasoned Offerings

Debt Policy

Leasing

Payout Policy

Long-Term Financial Planning

Short-Term Financial Planning

Cash and Inventory Management

Credit Management and Collection

Mergers, Acquisitions, and Corporate Control

International Financial Management

Options

Risk Management

Filters

Exam 10: Project Analysis

Selecting the lowest cost technology:

A project that breaks even in accounting terms will surely have a negative NPV.

Calculate the NPV break-even level of sales for a project requiring an investment of $3,000,000 and providing as cash flows:.15 × sales less $250,000.Assume the project will generate these cash flows for 10 years and that the discount rate is 10 percent.

Conflicts of interest between shareholders and managers may result in the sacrifice of attractive capital budgeting proposals.

Discuss the basic difference between an accounting break-even point analysis and an NPV break-even analysis.Which would you consider more reliable? Which would you consider more common? Why?

How much depreciation expense exists in a firm that has a break-even level of revenues of $2 million, fixed costs of $400,000, and a 60 percent ratio of variable costs to sales?

Fixed costs:

The inputs that are most worth refining before you commit to a project are the ones that have the greatest potential to alter project NPV.

What happens to the NPV of a one-year project if fixed costs are increased from $400 to $600, the firm is not profitable, has a 15% tax rate and employs a 12% cost of capital?

Goals and Governance of the Firm

Financial Markets and Institutions

Accounting and Finance

Measuring Corporate Performance

The Time Value of Money

Valuing Bonds

Valuing Stocks

Net Present Value and Other Investment Criteria

Using Discounted Cash Flow Analysis to Make Investment Decisions

Introduction to Risk, Return, and the Opportunity Cost of Capital

Risk, Return, and Capital Budgeting

The Weighted-Average Cost of Capital and Company Valuation

Introduction to Corporate Financing and Governance

Venture Capital, Ipos, and Seasoned Offerings

Debt Policy

Leasing

Payout Policy

Long-Term Financial Planning

Short-Term Financial Planning

Cash and Inventory Management

Credit Management and Collection

Mergers, Acquisitions, and Corporate Control

International Financial Management

Options

Risk Management

Filters