Question 1

Tangible assets usually have higher abandonment values than intangible ones.

Accepted Answer

A) True 
 B)False

Question 2

Firms that operate at break-even on an accounting basis are really losing the opportunity cost of capital on their investments.

Accepted Answer

A) True 
 B)False

Question 3

All else equal,an increase in fixed costs:
I.increases the break-even point based on NPV;
II.increases the accounting break-even point;
III.decreases the break-even point based on NPV;
IV.decreases the accounting break-even point

Accepted Answer

A) I and IV only 
B) III and IV only 
C) II and III only 
D) I and II only 
A) I and IV only 
B) III and IV only 
C) II and III only 
D) I and II only

Question 4

The accounting break-even point occurs when:

Accepted Answer

A) the total revenue line cuts the fixed cost line. 
B) the present value of inflows line cuts the present value of outflows line. 
C) the total revenue line cuts the total cost line. 
D) total revenue is large enough to recapture depreciation expense. 
A) the total revenue line cuts the fixed cost line. 
B) the present value of inflows line cuts the present value of outflows line. 
C) the total revenue line cuts the total cost line. 
D) total revenue is large enough to recapture depreciation expense.

Question 5

Briefly discuss break-even analysis.

Accepted Answer

Break-even analysis provides the minimum

Question 6

Monte Carlo simulation is mostly an advanced version of scenario analysis.

Accepted Answer

A) True 
 B)False

Question 7

Generally,Monte Carlo models,for project analysis,use which device to generate simulations?

Accepted Answer

A) pair of dice 
B) roulette wheel 
C) computer 
D) pack of cards 
A) pair of dice 
B) roulette wheel 
C) computer 
D) pack of cards

Question 8

Which of the following does NOT represent an option to expand a project?

Accepted Answer

A) A firm leases more office space than it forecasts it will need. 
B) A company engages in test marketing for a new product. 
C) Your university builds an administrators' parking garage having more parking spaces than administrators. 
D) A dry cleaner purchases equipment that can be readily sold to other dry cleaners. 
A) A firm leases more office space than it forecasts it will need. 
B) A company engages in test marketing for a new product. 
C) Your university builds an administrators' parking garage having more parking spaces than administrators. 
D) A dry cleaner purchases equipment that can be readily sold to other dry cleaners.

Question 9

Briefly describe sensitivity analysis as used for project analysis.

Accepted Answer

By using sensitivity analysis one can de

Question 10

Briefly explain timing options.

Accepted Answer

Companies with positive-NPV projects nee

Question 11

The Consumer-Mart Company is going to introduce a new consumer product.If brought to market without research about consumer tastes the firm believes that there is a 60% chance that the product will be successful.If successful,the project has a NPV = $500,000.If the product is a failure (40%)and withdrawn from the market,then NPV = -$100,000.A consumer survey will cost $60,000 and delay the introduction by one year.With a survey,there is an 80% chance of consumer acceptance,in which case the NPV = $500,000.If,on the other hand the product is a failure (20%)and withdrawn from the market,then NPV = -$100,000.The discount rate is 10%.By how much does the marketing survey change the expected net present value of the project?

Accepted Answer

A) increases the NPV by $25,455 
B) decreases the NPV by $5950 
C) increases the NPV by $8955 
D) decreases the NPV by $25,455 
A) increases the NPV by $25,455 
B) decreases the NPV by $5950 
C) increases the NPV by $8955 
D) decreases the NPV by $25,455

Question 12

You are given the following net future values for harvesting trees from a plot of forestland.(This is a one-time harvest.) $$\begin{array} { l c c c c c c } 
\text { Year } & 0 & 1 & 2 & 3 & 4 & 5 \
\text { Net Future Value } & 100 & 125 & 150 & 175 & 195 & 210
\end{array}$$
If the cost of capital is 15%,calculate the optimal year to harvest:

Accepted Answer

A) year 1 
B) year 2 
C) year 3 
D) year 4 
A) year 1 
B) year 2 
C) year 3 
D) year 4

Question 13

Most firms' capital investment proposals originate from:

Accepted Answer

A) senior management. 
B) planning staff,corporate finance department. 
C) the board of directors. 
D) divisional management. 
A) senior management. 
B) planning staff,corporate finance department. 
C) the board of directors. 
D) divisional management.

Question 14

How do managers supplement the NPV analysis of a project to gain a better understanding of a project?

Accepted Answer

Generally,managers supplement the NPV an

Question 15

Postaudits are conducted before the start of projects.

Accepted Answer

A) True 
 B)False

Exam 10: Project Analysis

Tangible assets usually have higher abandonment values than intangible ones.

Firms that operate at break-even on an accounting basis are really losing the opportunity cost of capital on their investments.

All else equal,an increase in fixed costs: I.increases the break-even point based on NPV; II.increases the accounting break-even point; III.decreases the break-even point based on NPV; IV.decreases the accounting break-even point

The accounting break-even point occurs when:

Briefly discuss break-even analysis.

Monte Carlo simulation is mostly an advanced version of scenario analysis.

Generally,Monte Carlo models,for project analysis,use which device to generate simulations?

Which of the following does NOT represent an option to expand a project?

Briefly describe sensitivity analysis as used for project analysis.

Briefly explain timing options.

You are given the following net future values for harvesting trees from a plot of forestland.(This is a one-time harvest.) Year 0 1 2 3 4 5 Net Future Value 100 125 150 175 195 210 If the cost of capital is 15%,calculate the optimal year to harvest:

Most firms' capital investment proposals originate from:

How do managers supplement the NPV analysis of a project to gain a better understanding of a project?

Postaudits are conducted before the start of projects.

Introduction to Corporate Finance

How to Calculate Present Values

Valuing Bonds

The Value of Common Stocks

Net Present Value and Other Investment Criteria

Making Investment Decisions With the Net Present Value Rule

Introduction to Risk and Return

Portfolio Theory and the Capital Asset Pricing Model

Risk and the Cost of Capital

Investment, Strategy, and Economic Rents

Agency Problems, Compensation, and Performance Measurement

Efficient Markets and Behavioral Finance

An Overview of Corporate Financing

How Corporations Issue Securities

Payout Policy

Does Debt Policy Matter

How Much Should a Corporation Borrow

Financing and Valuation

Understanding Options

Valuing Options

Real Options

Credit Risk and the Value of Corporate Debt

The Many Different Kinds of Debt

Leasing

Managing Risk

Managing International Risks

Financial Analysis

Financial Planning

Working Capital Management

Mergers

Corporate Restructuring

Governance and Corporate Control Around the World

Filters