CHAPTER 8
Making Capital Investment Decisions I. DEFINITIONS
INCREMENTAL CASH FLOWS
a 1. The changes in a firm’s future cash flows that are a direct consequence of accepting a
project are called _____ cash flows.
a. incremental
b. stand-alone
c. after-tax
d. net present value
e. erosion
Difficulty level: Easy
EQUIVALENT ANNUAL COST
e 2. The annual annuity stream o
f payments with the same present value as a project’s costs
is called the project’s _____ cost.
a. incremental
b. sunk
c. opportunity
d. erosion
e. equivalent annual
Difficulty level: Easy
SUNK COSTS
c 3. A cost that has already been paid, or the liability to pay has already been incurred, is
a(n):
a. salvage value expense.
b. net working capital expense.
c. sunk cost.
d. opportunity cost.
e. erosion cost.
Difficulty level: Easy
OPPORTUNITY COSTS
d 4. Th
e most valuable investment given up i
f an alternative investment is chosen is a(n):
a. salvage value expense.
b. net working capital expense.
c. sunk cost.
d. opportunity cost.
e. erosion cost.
Difficulty level: Easy
EROSION COSTS
e 5. The cash flows o
f a new project that come at the expense of a firm’s existin
g projects
are called:
a. salvage value expenses.
b. net working capital expenses.
c. sunk costs.
d. opportunity costs.
e. erosion costs.
Difficulty level: Easy
PRO FORMA FINANCIAL STATEMENTS
a 6. A pro forma financial statement is one that:
a. projects future years’ operations.
b. is expressed as a percentage of the total assets of the firm.
c. is expressed as a percentage of the total sales of the firm.
d. is expressed relative to a chosen base year’s financial statement.
e. reflects the past and current operations of the firm.
Difficulty level: Easy
MACRS DEPRECIATION
b 7. The depreciation method currently allowed under US tax law governing the accelerated
write-off of property under various lifetime classifications is called _____ depreciation.
a. FIFO
b. MACRS
c. straight-line
d. sum-of-years digits
e. curvilinear
Difficulty level: Easy
DEPRECIATION TAX SHIELD
c 8. The cash flow tax savings generate
d as a result of a firm’s tax-deductibl
e depreciation
expense is called the:
a. after-tax depreciation savings.
b. depreciable basis.
c. depreciation tax shiel
d.
d. operating cash flow.
e. after-tax salvage value.
Difficulty level: Easy
CASH FLOW
d 9. Th
e cash flow from projects for a company is computed as the:
a. net operating cash flow generated by the project, less any sunk costs and erosion costs.
b. sum of the incremental operating cash flow and after-tax salvage value of the project.
c. net income generated by the project, plus the annual depreciation expense.
d. sum of the incremental operating cash flow, capital spending, and net working capital
expenses incurred by the project.
e. sum of the sunk costs, opportunity costs, and erosion costs of the project.
Difficulty level: Medium
II. CONCEPTS
PRO FORMA INCOME STATEMENT
b 10. The pro forma income statement for a cost reduction project:
a. will reflect a reduction in the sales of the firm.
b. will generally reflect no incremental sales.
c. has to be prepared reflecting the total sales and expenses of a firm.
d. cannot be prepared due to the lack of any project related sales.
e. will always reflect a negative project operating cash flow.
Difficulty level: Easy
INCREMENTAL CASH FLOW
b 11. One purpose of identifying all of the incremental cash flows related to a proposed
project is to:
a. isolate the total sunk costs so they can be evaluated to determine if the project will
add value to the firm.
b. eliminate any cost which has previously been incurred so that it can be omitted from
the analysis of the project.
c. make each project appear as profitable as possible for the firm.
d. include both the proposed and the current operations of a firm in the analysis of the
project.
e. identify any and all changes in the cash flows of the firm for the past year so they can
be included in the analysis.
Difficulty level: Medium
INCREMENTAL CASH FLOW
e 12. Which o
f the followin
g are examples of an incremental cas
h flow?
I. an increase in accounts receivable
II. a decrease in net working capital
III. an increase in taxes
IV. a decrease in the cost of goods sold
a. I and III only
b. III and IV only
c. I and IV only
d. I, III, and IV only
e. I, II, III, and IV
Difficulty level: Medium
INCREMENTAL CASH FLOW
c 13. Which one of the following is an example of an incremental cash flow?
a. the annual salary of the company president which is a contractual obligation
b. the rent on a warehouse which is currently being utilized
c. the rent on some new machinery that is required for an upcoming project
d. the property taxes on the currently owned warehouse which has been sitting idle but
is going to be utilized for a new project
e. the insurance on a company-owned building which will be utilized for a new project
Difficulty level: Medium
INCREMENTAL COSTS
d 14. Project analysis is focused on _____ costs.
a. sunk
b. total
c. variable
d. incremental
e. fixed
Difficulty level: Medium
SUNK COST
c 15. Sunk costs include any cost that:
a. will change if a project is undertaken.
b. will be incurred if a project is accepted.
c. has previously been incurred and cannot be change
d.
d. is paid to a third party and cannot be refunded for any reason whatsoever.
e. will occur if a project is accepted and once incurred, cannot be recouped.
Difficulty level: Easy
SUNK COST
d 16. You spent $500 last week fixing th
e transmission in your car. Now, the brakes are
acting up and you are trying to decide whether to fix them or trade the car in for a
newer model. In analyzing the brake situation, the $500 you spent fixing the
transmission is a(n) _____ cost.
a. opportunity
b. fixed
c. incremental
d. sunk
e. relevant
Difficulty level: Easy
EROSION
b 17. Erosion can be explained as the:
a. additional income generated from the sales of a newly added product.
b. loss of current sales due to a new project being implemented.
c. loss of revenue due to employee theft.
d. loss of revenue due to customer theft.
e. loss of cash due to the expenses required to fix a parking lot after a heavy rain storm.
Difficulty level: Easy
EROSION
a 18. Which of the following are examples of erosion?
I. the loss of sales due to increased competition in the product market
II. the loss of sales because your chief competitor just opened a store across the street from your store
III. the loss of sales due to a new product which you recently introduced
IV. the loss of sales due to a new product recently introduced by your competitor
a. III only
b. III and IV only
c. I, III and IV only
d. II and IV only
e. I, II, III, and IV
Difficulty level: Medium
TYPES OF COSTS
d 19. Which of th
e following should be included in the analysis o
f a project?
I. sunk costs
II. opportunity costs
III. erosion costs
IV. incremental costs
a. I and II only
b. III and IV only
c. II and IV only
d. II, III, and IV only
e. I, II, and IV only
Difficulty level: Medium
NET WORKING CAPITAL
d 20. All of th
e following are anticipated effects o
f a proposed project. Which of these
should be included in the initial project cash flow related to net working capital?
I. an inventory decrease of $5,000
II. an increase in accounts receivable of $1,500
III. an increase in fixed assets of $7,600
IV. a decrease in accounts payable of $2,100
a. I and II only
b. I and III only
c. II and IV only
d. I, II, and IV only
e. I, II, III, and IV
Difficulty level: Medium
NET WORKING CAPITAL
a 21. Changes in the net working capital:
a. can affect the cash flows of a project every year of the project’s life.
b. only affect the initial cash flows of a project.
c. are included in project analysis only if they represent cash outflows.
d. are generally excluded from project analysis due to their irrelevance to the total
project.
e. affect the initial and the final cash flows of a project but not the cash flows of the
middle years.
Difficulty level: Medium
NET WORKING CAPITAL
c 22. Which one of the following will decrease net working capital of a firm?
a. a decrease in accounts payable
b. an increase in inventory
c. a decrease in accounts receivable
d. an increase in the firm’s checking account balance
e. a decrease in fixed assets
Difficulty level: Easy
NET WORKING CAPITAL
d 23. Net working capital:
a. can be ignored in project analysis because any expenditure is normally recouped by the
end of the project.
b. requirements generally, but not always, create a cash inflow at the beginning of a
project.
c. expenditures commonly occur at the end of a project.
d. is frequently affected by the additional sales generated by a new project.
e. is the only expenditure where at least a partial recovery can be made at the end of a
project.
Difficulty level: Easy
MACRS
d 24. A company which uses th
e MACRS system o
f depreciation:
a. will have equal depreciation costs each year of an asset’s life.
b. will expense the cost of nonresidential real estate over a period of 7 years.
c. can depreciate the cost of land, if they so desire.
d. will write off the entire cost of an asset over the asset’s class lif
e.
e. cannot expense any of the cost of a new asset during the first year of the asset’s life.
Difficulty level: Easy
MACRS
a 25. Bet ‘r Bilt Toys just purchased some MACRS 5-year property at a cost of $230,000.
Which of the following will correctly give you the book value of this equipment at the
end of year 2?
MACRS 5-year property
Year Rate
1 20.00%
2 32.00%
3 19.20%
4 11.52%
5 11.52%
6 5.76%
I. 52% of the asset cost
II. 48% of the asset cost
III. 68% of 80% of the asset cost
IV. the asset cost, minus 20% of the asset cost, minus 32% of 80% of the asset cost
a. II only
b. III and IV only
c. I and III only
d. II and IV only
e. I, II, III, and IV
Difficulty level: Easy
MACRS
e 26. Will Do, Inc. just purchased some equipment at a cost o
f $650,000. What is the
proper methodology for computing the depreciation expense for year 3 if the
equipment is classified as 5-year property for MACRS?
MACRS 5-year property
Year Rate
1 20.00%
2 32.00%
3 19.20%
4 11.52%
5 11.52%
6 5.76%
a. $650,000 ? (1-.20) ? (1-.32) ? (1-.192)
b. $650,000 ? (1-.20) ? (1-.32)
c. $650,000 ? (1+.20) ? (1+.32) ? (1+.192)
d. $650,000 ? (1-.192)
e. $650,000 ? .192
Difficulty level: Medium
BOOK VALUE
d 27. Th
e book value o
f an asset is primarily used to compute the:
a. annual depreciation tax shield.
b. amount of cash received from the sale of an asset.
c. amount of tax saved annually due to the depreciation expense.
d. amount of tax due on the sale of an asset.
e. change in depreciation needed to reflect the market value of the asset.
Difficulty level: Easy
SALVAGE VALUE
c 28. The salvage value of an asset creates an after-tax cash inflow to the firm in an amount
equal to the:
a. sales price of the asset.
b. sales price minus the book value.
c. sales price minus the tax due based on the sales price minus the book value.
d. sales price plus the tax due based on the sales price minus the book valu
e.
e. sales price plus the tax due based on the book value minus the sales price.
Difficulty level: Easy
SALVAGE VALUE
e 29. The pre-tax salvage value o
f an asset is equal to the:
a. book value if straight-line depreciation is used.
b. book value if MACRS depreciation is used.
c. market value minus the book value.
d. book value minus the market valu
e.
e. market value.
Difficulty level: Easy
PROJECT OCF
a 30. A project’s operating cash flow will increase when:
a. the depreciation expense increases.
b. the sales projections are lowered.
c. the interest expense is lowere
d.
d. the net working capital requirement increases.
e. the earnings before interest and taxes decreases.
Difficulty level: Easy
PROJECT CASH FLOWS
c 31. The cash flows of a project should:
a. be computed on a pre-tax basis.
b. include all sunk costs and opportunity costs.
c. include all incremental costs, including opportunity costs.
d. be applied to the year when the related expense or income is recognized by GAAP.
e. include all financing costs related to new debt acquired to finance the project.
Difficulty level: Easy
PROJECT OCF
a 32. Which of the following are correct methods for computing the operating cash flow of
a project assuming that the interest expense is equal to zero?
I. EBIT + Depreciation - Taxes
II. EBIT + Depreciation + Taxes
III. Net Income + Depreciation
IV. (Sales – Costs) ? (Taxes + Depreciation) ? (1-Taxes)
a. I and III only
b. II and IV only
c. II and III only
d. I, III, and IV only
e. II, III, and IV only
Difficulty level: Medium
BOTTOM-UP OCF
b 33. The bottom-up approach to computing the operating cash flow applies only when:
a. both the depreciation expense and the interest expense are equal to zero.
b. the interest expense is equal to zero.
c. the project is a cost-cutting project.
d. no fixed assets are required for the project.
e. taxes are ignored and the interest expense is equal to zero.
Difficulty level: Medium
TOP-DOWN OCF
a 34. The top-down approach to computing the operating cash flow:
a. ignores all noncash items.
b. applies only if a project produces sales.
c. can only be used if the entire cash flows of a firm are include
d.
d. is equal to sales - costs - taxes + depreciation.
e. includes the interest expense related to a project.
Difficulty level: Medium
TAX SHIELD
d 35. An increas
e in which one o
f the followin
g will increase the operating cas
h flow?
a. employee salaries
b. office rent
c. building maintenance
d. equipment depreciation
e. equipment rental
Difficulty level: Easy
TAX SHIELD
c 36. Tax shiel
d refers to a reduction in taxes created by:
a. a reduction in sales.
b. an increase in interest expense.
c. noncash expenses.
d. a project’s incremental expenses.
e. opportunity costs.
Difficulty level: Easy
COST-CUTTING
c 37. A project which is designe
d to improv
e the manufacturing efficiency o
f a firm but will
generate no additional sales is referred to as a(n) _____ project.
a. sunk cost
b. opportunity
c. cost-cutting
d. revenue-cutting
e. revenue-generating
Difficulty level: Easy
EQUIVALENT ANNUAL COST
c 38. Toni’s Tools is comparing machines to determine which one to purchase. The
machines sell for differing prices, have differing operating costs, differing machine
lives, and will be replaced when worn out. These machines should be compared using:
a. net present value only.
b. both net present value and the internal rate of return.
c. their effective annual costs.
d. the depreciation tax shield approach.
e. the replacement parts approach.
Difficulty level: Medium
EQUIVALENT ANNUAL COST
e 39. The equivalent annual cost method is useful in determining:
a. the annual operating cost of a machine if the annual maintenance is performed versus
when the maintenance is not performed as recommended.
b. the tax shield benefits of depreciation given the purchase of new assets for a project.
c. operating cash flows for cost-cutting projects of equal duration.
d. which one of two machines to acquire given equal machine lives but unequal machine
costs.
e. which one of two machines to purchase when the machines are mutually exclusive,
have different machine lives, and will be replaced once they are worn out.
Difficulty level: Medium
III. PROBLEMS
RELEVANT CASH FLOWS
d 40. Marshall’s & Co. purchased a corner lot in Eglon City fiv
e y ears ago at a cost of
$640,000. The lot was recently appraised at $810,000. At the time of the purchase, the
company spent $50,000 to grade the lot and another $4,000 to build a small building
on the lot to house a parking lot attendant who has overseen the use of the lot for daily
commuter parking. The company now wants to build a new retail store on the site. The
building cost is estimated at $1.2 million. What amount should be used as the initial
cash flow for this building project?
a. $1,200,000
b. $1,840,000
c. $1,890,000
d. $2,010,000
e. $2,060,000
Difficulty level: Medium
RELEVANT CASH FLOWS
e 41. Jamestown Ltd. currently produces boat sails and is considering expanding its
operations to include awnings for homes and travel trailers. The company owns land
beside its current manufacturing facility that could be used for the expansion. The
company bought this land ten years ago at a cost of $250,000. Today, the land is
valued at $425,000. The grading and excavation work necessary to build on the land
will cost $15,000. The company currently has some unused equipment which it
currently owns valued at $60,000. This equipment could be used for producing
awnings if $5,000 is spent for equipment modifications. Other equipment costing
$780,000 will also be required. What is the amount of the initial cash flow for this
expansion project?
a. $800,000
b. $1,050,000
c. $1,110,000
公司理财(英文版)题 库2
CHAPTER 2 Financial Statements & Cash Flow Multiple Choice Questions: I. DEFINITIONS BALANCE SHEET b 1. The financial statement showing a firm’s accounting value on a particular date is the: a. income statement. b. balance sheet. c. statement of cash flows. d. tax reconciliation statement. e. shareholders’ equity sheet. Difficulty level: Easy CURRENT ASSETS c 2. A current asset is: a. an item currently owned by the firm. b. an item that the firm expects to own within the next year. c. an item currently owned by the firm that will convert to cash within the next 12 months. d. the amount of cash on hand the firm currently shows on its balance sheet. e. the market value of all items currently owned by the firm. Difficulty level: Easy LONG-TERM DEBT b 3. The long-term debts of a firm are liabilities: a. that come due within the next 12 months. b. that do not come due for at least 12 months. c. owed to the firm’s suppliers. d. owed to the firm’s shareholde rs. e. the firm expects to incur within the next 12 months. Difficulty level: Easy NET WORKING CAPITAL e 4. Net working capital is defined as: a. total liabilities minus shareholders’ equity. b. current liabilities minus shareholders’ equity. c. fixed assets minus long-term liabilities. d. total assets minus total liabilities. e. current assets minus current liabilities. Difficulty level: Easy LIQUID ASSETS d 5. A(n) ____ asset is on e which can be quickly converted into cash without significant loss in value.
CHAPTER 2 Financial Statements & Cash Flow Multiple Choice Questions: I. DEFINITIONS BALANCE SHEET b 1. The financial statement showing a firm’s accounting value on a particular date is the: a. income statement. b. balance sheet. c. statement of cash flows. d. tax reconciliation statement. e. shareholders’ equity sheet. Difficulty level: Easy CURRENT ASSETS c 2. A current asset is: a. an item currently owned by the firm. b. an item that the firm expects to own within the next year. c. an item currently owned by the firm that will convert to cash within the next 12 months. d. the amount of cash on hand the firm currently shows on its balance sheet. e. the market value of all items currently owned by the firm. Difficulty level: Easy LONG-TERM DEBT b 3. The long-term debts of a firm are liabilities: a. that come due within the next 12 months. b. that do not come due for at least 12 months. c. owed to the firm’s suppliers. d. owed to the firm’s shareholders. e. the firm expects to incur within the next 12 months. Difficulty level: Easy NET WORKING CAPITAL e 4. Net working capital is defined as: a. total liabilities minus shareholders’ equity. b. current liabilities minus shareholders’ equity. c. fixed assets minus long-term liabilities. d. total assets minus total liabilities. e. current assets minus current liabilities. Difficulty level: Easy LIQUID ASSETS d 5. A(n) ____ asset is on e which can be quickly converted into cash without significant loss in value.
Chapter 04 Discounted Cash Flow Valuation Answer Key Multiple Choice Questions 1. An annuity stream of cash flow payments is a set of: A.level cash flows occurring each time period for a fixed length of time. B. level cash flows occurring each time period forever. C. increasing cash flows occurring each time period for a fixed length of time. D. increasing cash flows occurring each time period forever. E. arbitrary cash flows occurring each time period for no more than 10 years. Difficulty level: Easy Topic: ANNUITY Type: DEFINITIONS
2. Annuities where the payments occur at the end of each time period are called _____, whereas _____ refer to annuity streams with payments occurring at the beginning of each time period. A. ordinary annuities; early annuities B. late annuities; straight annuities C. straight annuities; late annuities D. annuities due; ordinary annuities E.ordinary annuities; annuities due Difficulty level: Easy Topic: ANNUITIES DUE Type: DEFINITIONS
CHAPTER 8 Making Capital Investment Decisions I. DEFINITIONS INCREMENTAL CASH FLOWS a 1. The changes in a firm's future cash flows that are a direct consequence of accepting a project are called _____ cash flows. a. incremental b. stand-alone c. after-tax d. net present value e. erosion Difficulty level: Easy EQUIVALENT ANNUAL COST e 2. The annual annuity stream o f payments with the same present value as a project's costs is called the project's _____ cost. a. incremental b. sunk c. opportunity d. erosion e. equivalent annual Difficulty level: Easy SUNK COSTS c 3. A cost that has already been paid, or the liability to pay has already been incurred, is a(n): a. salvage value expense. b. net working capital expense. c. sunk cost. d. opportunity cost. e. erosion cost. Difficulty level: Easy OPPORTUNITY COSTS d 4. Th e most valuable investment given up i f an alternative investment is chosen is a(n): a. salvage value expense. b. net working capital expense.
CHAPTER 20 INTERNATIONAL CORPORATE FINANCE Answers to Concepts Review and Critical Thinking Questions 1. a. The dollar is selling at a premium because it is more expensive in the forward market than in the spot market (SFr 1.53 versus SFr 1.50). b.The franc is expected to depreciate relative to the dollar because it will take more francs to buy one dollar in the future than it does today. c.Inflation in Switzerland is higher than in the United States, as are nominal interest rates. 2.The exchange rate will increase, as it will take progressively more pesos to purchase a dollar. This is the relative PPP relationship. 3.a.The Australian dollar is expected to weaken relative to the dollar, because it will take more A$ in the future to buy one dollar than it does today. b.The inflation rate in Australia is higher. c.Nominal interest rates in Australia are higher; relative real rates in the two countries are the same. 4. A Yankee bond is most accurately described by d. 5. No. For example, if a cou ntry’s currency strengthens, imports bee cheaper (good), but its exports bee more expensive for others to buy (bad). The reverse is true for currency depreciation. 6.Additional advantages include being closer to the final consumer and, thereby, saving on transportation, significantly lower wages, and less exposure to exchange rate risk. Disadvantages include political risk and costs of supervising distant operations. 7. One key thing to remember is that dividend payments are made in the home currency. More generally, it may be that the owners of the multinational are primarily domestic and are ultimately concerned about their wealth denominated in their home currency because, unlike a multinational, they are not internationally diversified.
CHAPTER 8 MAKING CAPITAL INVESTMENT DECISIONS Answers to Concepts Review and Critical Thinking Questions 1. In this context, an opportunity cost refers to the value of an asset or other input that will be used in a project. The relevant cost is what the asset or input is actually worth today, not, for example, what it cost to acquire. 2. a.Yes, the reduction in the sales of the company’s other products, referred to as erosion, and should be treated as an incremental cash flow. These lost sales are included because they are a cost (a revenue reduction) that the firm must bear if it chooses to produce the new product. b. Yes, expenditures on plant and equipment should be treated as incremental cash flows. These are costs of the new product line. However, if these expenditures have already occurred, they are sunk costs and are not included as incremental cash flows. c. No, the research and development costs should not be treated as incremental cash flows. The costs of research and development undertaken on the product during the past 3 years are sunk costs and should not be included in the evaluation of the project. Decisions made and costs incurred in the past cannot be changed. They should not affect the decision to accept or reject the project. d. Yes, the annual depreciation expense should be treated as an incremental cash flow. Depreciation expense must be taken into account when calculating the cash flows related to a given project. While depreciation is not a cash expense that directly affects c ash flow, it decreases a firm’s net
Fundamentals of Corporate Finance, 12e (Ross) Chapter 11 Project Analysis and Evaluation 1) Forecasting risk is defined as the possibility that: A) some proposed projects will be rejected. B) some proposed projects will be temporarily delayed. C) incorrect decisions will be made due to erroneous cash flow projections. D) some projects will be mutually exclusive. E) tax rates could change over the life of a project. 2) The key means of defending against forecasting risk is to: A) rely primarily on the net present value method of analysis. B) increase the discount rate assigned to a project. C) shorten the life of a project. D) identify sources of value within a project. E) ignore any potential salvage value that might be realized. 3) Steve is fairly cautious when analyzing a new project and thus he projects the most optimistic, the most realistic, and the most pessimistic outcome that can reasonably be expected. Which type of analysis is he using? A) Simulation testing B) Sensitivity analysis C) Break-even analysis D) Rationing analysis E) Scenario analysis 4) Scenario analysis is best suited to accomplishing which one of the following when analyzing a project? A) Determining how fixed costs affect NPV B) Estimating the residual value of fixed assets C) Identifying the potential range of reasonable outcomes D) Determining the minimal level of sales required to break-even on an accounting basis E) Determining the minimal level of sales required to break-even on a financial basis 5) Which one of the following will be used in the computation of the best-case analysis of a proposed project? A) Minimal number of units that are expected to be produced and sold B) The lowest expected salvage value that can be obtained for a project's fixed assets C) The most anticipated sales price per unit D) The lowest variable cost per unit that can reasonably be expected E) The highest level of fixed costs that is actually anticipated
CHAPTER 9 Risk Analysis, Real Options, and Capital Budgeting Multiple Choice Questions: I、DEFINITIONS SCENARIO ANALYSIS b 1、An analysis of what happens to the estimate of the net present value when you examine a number of different likely situations is called _____ analysis、 a、forecasting b、scenario c、sensitivity d、simulation e、break-even Difficulty level: Easy SENSITIVITY ANALYSIS c 2、An analysis of what happens to the estimate of net present value when only one variable is changed is called _____ analysis、 a、forecasting b、scenario c、sensitivity d、simulation e、break-even Difficulty level: Easy SIMULATION ANALYSIS d 3、An analysis which combines scenario analysis with sensitivity analysis is called _____ analysis、 a、forecasting b、scenario c、sensitivity d、simulation e、break-even Difficulty level: Easy BREAK-EVEN ANALYSIS e 4、An analysis o f the relationship between the sales volume and various measures of profitability is called _____ analysis、 a、forecasting b、scenario c、sensitivity d、simulation e、break-even Difficulty level: Easy VARIABLE COSTS a 5、Variable costs: a、change in direct relationship to the quantity of output produced、 b、are constant in the short-run regardless of the quantity of output produced、 c、reflect the change in a variable when one more unit of output is produce d、
公司理财习题答案 第十二章 Chapter 12: Risk, Return, and Capital Budgeting 12.1 Cost of equity R S = 5 + 0.95 (9) = 13.55% NPV of the project = -$1.2 million + $340,.00011355 1 5 t t =∑ = -$20,016.52 Do not undertake the project. 12.2 a. R D = (-0.05 + 0.05 + 0.08 + 0.15 + 0.10) / 5 = 0.066 R M = (-0.12 + 0.01 + 0.06 + 0.10 + 0.05) / 5 = 0.02 b. D R - D R M R -R M (M R -M R )2 (D R -R D )(M R -R M ) -0.116 -0.14 0.0196 0.01624 -0.016 -0.01 0.0001 0.00016 0.014 0.04 0.0016 0.00056 0.084 0.08 0.0064 0.00672 0.034 0.03 0.0009 0.00102 0.0286 0.02470 Beta of Douglas = 0.02470 / 0.0286 = 0.864 12.3 R S = 6% + 1.15 ? 10% = 17.5% R B = 6% + 0.3 ? 10% = 9% a. Cost of equity = R S = 17.5% b. B / S = 0.25 B / (B + S) = 0.2 S / (B + S) = 0.8 WACC = 0.8 ? 17.5% + 0.2 ? 9% (1 - 0.35) = 15.17% 12.4 C σ = ()21 04225.0 = 0.065 M σ = ()21 01467 .0 = 0.0383 Beta of ceramics craftsman = CM ρC σ M σ / M σ2 = CM ρC σ/ M σ = (0.675) (0.065) / 0.0383 = 1.146 12.5 a. To compute the beta of Mercantile Manufacturing’s stock, you need the product of the deviations of Mercantile’s returns from their mean and the deviations of the market’s returns from their mean. You also need the squares of the deviations of the market’s returns from their mean.
CHAPTER 15 Capital Structure: Basic Concepts Multiple Choice Questions: I. DEFINITIONS HOMEMADE LEVERAGE a 1. The use of personal borrowing to change the overall amount of financial leverage to which an individual is exposed is called: leverage. a. homemade recapture. b. dividend c. the weighted average cost of capital. d. private placement. debt offset. e. personal Difficulty level: Easy MM PROPOSITION I b 2. The proposition that the value of the firm is independent of its capital structure is called: a. the capital asset pricing model. b. MM Proposition I. c. MM Proposition II. d. the law of one pric e. e. the efficient markets hypothesis. Difficulty level: Easy MM PROPOSITION II c 3. The proposition that the cost of equity is a positive linear function of capital structure is called: a. the capital asset pricing model. b. MM Proposition I. c. MM Proposition II. d. the law of one pric e. e. the efficient markets hypothesis. Difficulty level: Medium INTEREST TAX SHIELD a 4. The tax savings of the firm derived from the deductibility of interest expense is called the: a. interest shield. tax basis. b. depreciable umbrella. c. financing d. current yield. e. tax-loss carryforward savings. Difficulty level: Easy
CHAPTER 7 Net Present Value and Other Investment Rules Multiple Choice Questions: I. DEFINITIONS NET PRESENT V ALUE a 1. The difference between the present value of an investment and its cost is the: a. net present value. b. internal rate of return. c. payback perio d. d. profitability index. e. discounted payback period. Difficulty level: Easy NET PRESENT V ALUE RULE c 2. Which one of the following statements concerning net present value (NPV) is correct? a. An investment should be accepted if, and only if, the NPV is exactly equal to zero. b. An investment should be accepted only if the NPV is equal to the initial cash flow. c. An investment should be accepted if the NPV is positive and rejected if it is negative. d. An investment with greater cash inflows than cash outflows, regardless of when the cash flows occur, will always have a positive NPV and therefore should always be accepted. e. Any project that has positive cash flows for every time period after the initial investment should be accepted. Difficulty level: Easy PAYBACK c 3. The length of time require d for an investment to generat e cash flows sufficient to recover the initial cost o f the investment is called the: a. net present value. b. internal rate of return. c. payback perio d. d. profitability index. e. discounted cash period. Difficulty level: Easy
Chapter 02 Financial Statements and Cash Flow Answer Key Multiple Choice Questions 1.The financial statement showing a firm's accounting value on a particular date is the: A.income statement. B.balance sheet. C.statement of cash flows. D.tax reconciliation statement. E.shareholders' equity sheet. Difficulty level: Easy Topic: BALANCE SHEET Type: DEFINITIONS 2.A current asset is: A.an item currently owned by the firm. B.an item that the firm expects to own within the next year. C.an item currently owned by the firm that will convert to cash within the next 12 months. D.the amount of cash on hand the firm currently shows on its balance sheet. E.the market value of all items currently owned by the firm. Difficulty level: Easy Topic: CURRENT ASSETS Type: DEFINITIONS
v .. . .. CHAPTER 2 Financial Statements & Cash Flow Multiple Choice Questions: I. DEFINITIONS BALANCE SHEET b 1. The financial statement showing a firm’s accounting value on a particular date is the: a. income statement. b. balance sheet. c. statement of cash flows. d. tax reconciliation statement. e. shareholders’ equity sheet. Difficulty level: Easy CURRENT ASSETS c 2. A current asset is: a. an item currently owned by the firm. b. an item that the firm expects to own within the next year. c. an item currently owned by the firm that will convert to cash within the next 12 months. d. the amount of cash on hand the firm currently shows on its balance sheet. e. the market value of all items currently owned by the firm. Difficulty level: Easy LONG-TERM DEBT b 3. The long-term debts of a firm are liabilities: a. that come due within the next 12 months. b. that do not come due for at least 12 months. c. owed to the firm’s suppliers. d. owed to the firm’s shareholders. e. the firm expects to incur within the next 12 months. Difficulty level: Easy NET WORKING CAPITAL e 4. Net working capital is defined as: a. total liabilities minus shareholders’ equity. b. current liabilities minus shareholders’ equity.
Chapter 01 Introduction to Corporate Finance Answer Key Multiple Choice Questions 1. The person generally directly responsible for overseeing the tax management, cost accounting, financial accounting, and information system functions is the: A. treasurer. B. director. C. controller. D. chairman of the board. E. chief executive officer. Difficulty level: Easy Topic: CONTROLLER Type: DEFINITIONS 2. The person generally directly responsible for overseeing the cash and credit functions, financial planning, and capital expenditures is the: A. treasurer. B. director. C. controller. D. chairman of the board. E. chief operations officer.
3. The process of planning and managing a firm's long-term investments is called: A. working capital management. B. financial depreciation. C. agency cost analysis. D. capital budgeting. E. capital structure. Difficulty level: Easy Topic: CAPITAL BUDGETING Type: DEFINITIONS 4. The mixture of debt and equity used by a firm to finance its operations is called: A. working capital management. B. financial depreciation. C. cost analysis. D. capital budgeting. E. capital structure. 5. The management of a firm's short-term assets and liabilities is called: A. working capital management. B. debt management. C. equity management. D. capital budgeting. E. capital structure.