Exam 15: Financial Analysis

A flexible manufacturing system is expected to cost $25,000,000 but has present values of after-tax cash flow as shown in the table.The interest rate used is 10 percent.What is the payback of this investment?

The advantage of using the modified accelerated cost recovery system (MACRS)for depreciation is that it extends the lives of investments,giving a firm a longer period of time before the item must be replaced.

The term ________ is often used to describe the common U.S.business practice of focusing on short-term results from low-risk projects via analysis by NPV or IRR calculations.

________ is an allowance for the consumption of capital.

The present value of an investment is the amount that must be invested now to accumulate to a certain amount in the future at a specific interest rate.

The value of an investment at the end of the period over which interest is compounded is called the:

The ________ is the interest rate that is the lowest desired return on an investment.

Cash flow is the cash that will flow into and out of the organization.

The amount that must be invested now to accumulate to a certain amount in the future at a specified interest rate is called the ________.

The process by which interest on an investment accumulates and then earns interest itself for the remainder of the investment period is called ________.

Which of the following is an accelerated depreciation method?

The value of an investment at the end of the period over which interest is compounded is called the future value of the investment.

The ________ is used to evaluate projects by calculating the amount of time that will elapse before the total of after-tax cash flows will equal the initial investment.

Discounting is the process by which interest on an investment accumulates,and then earns interest itself for the remainder of the investment period.

The interest rate is also called the discount rate.

Depreciation is not a legitimate cash flow.

Since 1986,the only acceptable accelerated depreciation method is the ________.

Explain the time-value-of-money concept.

Which method of analysis does not consider the time value of money?

The hurdle rate is the interest rate that is the highest desired return on an investment.