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Finance Final Exam
Terms in this set (28)
cost and market value
The net present value of an investment represents the difference between the investment's
recoup its initial cost
The payback period is the length of time it takes an investment to generate sufficient cash flows to enable the project to
average accounting return
The average net income of a project divided by the project's average book value is referred to as the project's:
Discount rate which results in a zero net present value for the project
Which one of the following defines the internal rate of return for a project?
The net present value profile illustrates how the net present value of an investment is affected by which one of the following?
multiple rates of return
The possibility that more than one discount rate can cause the net present value of an investment to equal zero is referred to as
Both Projects A and B are acceptable as independent projects. However, the selection of either one of these projects eliminates the option of selecting the other project. Which one of the following terms best describes the relationship between Project A and Project B?
Which one of the following can be defined as a benefit-cost ratio?
positive net present value
Which one of the following indicates that a project is expected to create value for its owners?
net present value
decreases as the required rate of return increases.
net present value
Which one of the following is generally considered to be the best form of analysis if you have to select a single method to analyze a variety of investment opportunities?
Which one of the following indicators offers the best assurance that a project will produce value for its owners?
average accounting return
Which one of the following methods of analysis ignores cash flows?
Which one of the following is specifically designed to compute the rate of return on a project that has unconventional cash flows?
Which one of the following terms is most commonly used to describe the cash flows of a new project that are simply an offset of reduced cash flows for a current project?
a cash inflow at time zero and a cash outflow at the end of the project
A proposed project will increase a firm's accounts payables. This increase is generally
The amount by which a firm's tax bill is reduced as a result of the depreciation expense is referred to as the depreciation:
projects future years' operations
A pro forma financial statement is a financial statement that:
accelerated cost recovery system
Which one of the following refers to a method of increasing the rate at which an asset is depreciated?
what process ask questions like 'will the net present value increase or decrease if the quantity sold increases by 100 units?'
Which one of the following terms refers to the best option that was foregone when a particular investment is selected?
recognizes that depreciation creates a cash inflow
The tax shield approach to computing the operating cash flow, given a tax-paying firm
Mark is analyzing a proposed project to determine how changes in the variable costs per unit would affect the project's net present value. What type of analysis is Mark conducting?
A cost that should be ignored when evaluating a project because that cost has already been incurred and cannot be recouped is referred to as which type of cost?
Kyle Electric has three positive net present value opportunities. Unfortunately, the firm has not been able to find financing for any of these projects. Which one of the following terms best describes the firm's situation?
Which one of the following principles refers to the assumption that a project will be evaluated based on its incremental cash flows?
Jamie is analyzing the estimated net present value of a project under various what if scenarios. The type of analysis that Jamie is doing is best described as:
decrease in fixed costs
Which one of the following will increase the operating cash flow as computed using the tax shield approach?
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