Question 1

Future modelling is a representation of the financial outcomes resulting from a decision or future event.

Accepted Answer

A) True 
 B)False

Question 2

Cisco, a provider of modems and routers has decided it is more profitable to outsource its production than to make it themselves. To decide this, they have performed __________.

Accepted Answer

A)  sensitivity analysis 
B)  make-or-buy analysis 
C)  scenario analysis 
D)  financial modeling

Question 3

Goal seek analysis uses the __________ to find the __________.

Accepted Answer

A)  actual output; actual input 
B)  actual input; actual output 
C)  desired output; required input 
D)  desired input; required output

Question 4

Whether the investment returns arrive in year 1 versus year 2 will not make a difference on the calculation of net present value.

Accepted Answer

A) True 
 B)False

Question 5

Determining the maximum mortgage loan you can afford given your income is an example of __________.

Accepted Answer

A)  scenario analysis 
B)  goal-seek analysis 
C)  marginal analysis 
D)  cash flow analysis

Question 6

What is the internal rate of return for a $33,000 investment (−33,000 at year zero) and cash inflows of $10,000 per year for years 1 through 4?

Accepted Answer

A)  8.16% 
B)  21.21% 
C)  7.18% 
D)  2.39%

Question 7

The process of changing the values in various input cells to see how they might affect the output is called foregone costs.

Accepted Answer

A) True 
 B)False

Question 8

What is the net present value for a $55,000 investment (−$55,000 in year zero) and cash inflows of $20,000 per year for years 1 through 4, using a 4% discount rate?

Accepted Answer

A)  $16,921.06 
B)  $25,000 
C)  −$25,000 
D)  −$16,921.06

Question 9

In any Excel functions that uses NPER for term, (e.g. PMT functions is =PMT(rate, NPER,FV, PV), the correct way to enter a 30 year term to compute monthly payments is __________.

Accepted Answer

A)  30 
B)  30×12 
C)  (30/12)/365 
D)  (30/12)×365

Question 10

Prescriptive analytics will optimize the decisions based on the forecast of the future.

Accepted Answer

A) True 
 B)False

Question 11

An accounting rate of return is the percentage of return expected on an asset compared to the initial investment cost.

Accepted Answer

A) True 
 B)False

Question 12

__________ is the cost of available funds for a company, which acts as a hurdle rate that the company must overcome to create value.

Accepted Answer

A)  The cost of capital 
B)  The required rate of return 
C)  The internal rate of return 
D)  The cost of funding

Question 13

The Excel formula to compute the annual payment for a car loan of $30,000 at 5% interest rate over five years is:

Accepted Answer

A)  =PMT(5,0.05,30000) 
B)  =PMT(30000, 0.05,5) 
C)  =PMT(0.05,60,30000) 
D)  =PMT(0.05,5,30000)

Question 14

Which of the following does not incorporate the time value of money in its analysis?

Accepted Answer

A)  Net present value 
B)  Internal rate of return 
C)  Accounting rate of return 
D)  Present value of cash outflows

Question 15

A series (such as monthly or annually) of fixed payments is called a(n) __________.

Accepted Answer

A)  annuity 
B)  lump-sum payment 
C)  sunk costs 
D)  capital payment

Question 16

The Excel formula to compute the net present value of cash flows for a $55,000 investment (−55,000 at year zero) and cash inflows of $20,000 per year for years 1 through 4, using a 4% discount rate is:

Accepted Answer

A)  =NPV(0.04,−55000,20000,20000,20000,20000) 
B)  =NPV(−55000,20000,20000,20000,20000,0.04) 
C)  =NPV(0.04, 55000,−20000,−20000,−20000,−20000) 
D)  =NPV(55000,−20000,−20000,−20000,−20000,0.04)

Question 17

The __________ is the interest rate that makes the present value of cash inflows just equal to the present value of cash outflows.

Accepted Answer

A)  net present value 
B)  internal rate of return 
C)  capital budget 
D)  marginal analysis

Question 18

The point at which it no longer matters which alternative is chosen since the outcome is the same under either alternative is called the __________.

Accepted Answer

A)  tipping point 
B)  point of indifference 
C)  decision point 
D)  point of equality

Question 19

In any Excel functions that use rate (e.g. PMT, IRR, NPV), the correct way to enter a monthly rate when the annual interest rate is 4 percent is __________.

Accepted Answer

A)  0.04 
B)  0.04/12 
C)  4 
D)  4/12

Question 20

All of the following are types of prescriptive analytics except:

Accepted Answer

A)  Goal-seek analysis 
B)  Regression analysis 
C)  Marginal analysis 
D)  Cash flow analysis

Exam 9: Perform the Analysis: Prescriptive Analytics

Future modelling is a representation of the financial outcomes resulting from a decision or future event.

Cisco, a provider of modems and routers has decided it is more profitable to outsource its production than to make it themselves. To decide this, they have performed __________.

Goal seek analysis uses the to find the .

Whether the investment returns arrive in year 1 versus year 2 will not make a difference on the calculation of net present value.

Determining the maximum mortgage loan you can afford given your income is an example of __________.

What is the internal rate of return for a $33,000 investment (−33,000 at year zero) and cash inflows of $10,000 per year for years 1 through 4?

The process of changing the values in various input cells to see how they might affect the output is called foregone costs.

What is the net present value for a $55,000 investment (−$55,000 in year zero) and cash inflows of $20,000 per year for years 1 through 4, using a 4% discount rate?

In any Excel functions that uses NPER for term, (e.g. PMT functions is =PMT(rate, NPER,FV, PV) , the correct way to enter a 30 year term to compute monthly payments is __________.

Prescriptive analytics will optimize the decisions based on the forecast of the future.

An accounting rate of return is the percentage of return expected on an asset compared to the initial investment cost.

__________ is the cost of available funds for a company, which acts as a hurdle rate that the company must overcome to create value.

The Excel formula to compute the annual payment for a car loan of $30,000 at 5% interest rate over five years is:

Which of the following does not incorporate the time value of money in its analysis?

A series (such as monthly or annually) of fixed payments is called a(n) __________.

The Excel formula to compute the net present value of cash flows for a $55,000 investment (−55,000 at year zero) and cash inflows of $20,000 per year for years 1 through 4, using a 4% discount rate is:

The __________ is the interest rate that makes the present value of cash inflows just equal to the present value of cash outflows.

The point at which it no longer matters which alternative is chosen since the outcome is the same under either alternative is called the __________.

In any Excel functions that use rate (e.g. PMT, IRR, NPV) , the correct way to enter a monthly rate when the annual interest rate is 4 percent is __________.

All of the following are types of prescriptive analytics except: