Exam 21: Financial Analysis

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

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 time value of money implies that a dollar in hand today is worth more than a dollar to be received in the future.

What is payback from the financial perspective? Why would a manager choose to use this approach to investment analysis?

Explain the time-value-of-money concept.

Depreciation is not a legitimate cash flow.

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.

The reduction of the value of money received in the future when the interest rate is known is called ________.

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

Describe the basic techniques of financial analysis.

________ is an allowance for the consumption of capital.

Depreciation:

The net present value (NPV)method evaluates an investment by calculating the present values of all after-tax total cash flows and then subtracting the original investment amount from their total.

Straight-line depreciation is an accelerated depreciation method.

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

What are the different types of depreciation? What are the advantages and disadvantages of each?

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 amount to be invested now to accumulate to a certain amount in the future at a specified interest rate is called the:

Which of the following is an accelerated depreciation method?

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