FIN 370 Week 5 Assignment | University of Phoenix
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- 05 Jul 2021
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FIN 370 Week 5 Assignment | University of Phoenix
1.
To ly project cash flows, we need to consider all of the factors EXCEPT:
Multiple Choice
• the likely impact that the new service or product will have on the firm's existing products' cost and revenues.
• All of the options are factors that need to be considered.
• the new product's or service's costs and revenues.
• use of assets or employees already employed by the firm.
2.
Equipment was purchased for $45,000 plus $2,000 in freight charges. Installation costs were $1,500 and sales tax totaled $1,000. Hiring a special consultant to provide advice during the selection of the equipment cost $3,000. What is this asset's depreciable basis?
Multiple Choice
• $48,500
• $51,500
• $49,500
• $52,500
3.
Suppose you sell a fixed asset for $99,000 when its book value is $75,000. If your company's marginal tax rate is 39 percent, what is the gain or loss on the sale of the asset?
Multiple Choice
• $24,000
• $14,640
• $11,600
• $10,300
4.
Suppose you sell a fixed asset for $75,000 when its book value is $80,000. If your company's marginal tax rate is 35 percent, what will be the effect on cash flows of this sale (i.e., what will be the after-tax cash flow of this sale)?
Multiple Choice
• $48,750
• $76,750
• $80,000
• $5,000
5.
All of the following can be included in the depreciable basis of an asset EXCEPT:
Multiple Choice
• sales tax.
• installation fees.
• freight charges.
• variable costs.
6.
A new project would require an immediate increase in raw materials in the amount $17,000. The firm expects that accounts payable will automatically increase $7,000. How much must the firm expect its investment in net working capital to increase if they accept this project?
Multiple Choice
• $7,000
• $24,000
• $10,000
• $17,000
7.
Effects that arise from a new product or service that increase sales of the firm's existing products or services are referred to as:
Multiple Choice
• sunk effects.
• marginal effects.
• substitutionary effects.
• complementary effects.
8.
Which of the following measures the operating cash flow a project produces minus the necessary investment in operating capital, and is as valid for proposed new projects as it is for the firm's current operations?
Multiple Choice
• Investment in operating capital
• Free cash flow
• Operating cash flow
• Sunk cash flow
9.
Concerning incremental project cash flow, which of these is a cost one would never count as an expense of the project?
Multiple Choice
• Initial investment
• Operating expenses of the project
• Financing costs
• Taxes paid
10.
Suppose you sell a fixed asset for $99,000 when its book value is $129,000. If your company's marginal tax rate is 39 percent, what will be the effect on cash flows of this sale (i.e., what will be the after-tax cash flow of this sale)?
Multiple Choice
• $80,700
• $84,800
• $110,700
• $77,300
11.
Your company is considering a new project that will require $10,000 of new equipment at the start of the project. The equipment will have a depreciable life of five years and will be depreciated to a book value of $3,000 using straight-line depreciation. The cost of capital is 9 percent, and the firm's tax rate is 34 percent. Estimate the present value of the tax benefits from depreciation.
Multiple Choice
• $1,400
• $924
• $476
• $1,851
12.
Your company is considering a new project that will require $100,000 of new equipment at the start of the project. The equipment will have a depreciable life of 10 years and will be depreciated to a book value of $5,000 using straight-line depreciation. The cost of capital is 14 percent, and the firm's tax rate is 30 percent. Estimate the present value of the tax benefits from depreciation.
Multiple Choice
• $14,030.79
• $15,017.25
• $15,997.13
• $14,865.93
13.
Your company is considering a new project that will require $100,000 of new equipment at the start of the project. The equipment will have a depreciable life of 10 years and will be depreciated to a book value of $25,000 using straight-line depreciation. The cost of capital is 11 percent, and the firm's tax rate is 34 percent. Estimate the present value of the tax benefits from depreciation.
Multiple Choice
• $15,017.54
• $13,607.52
• $14,841.29
• $16,997.13
14.
You are trying to pick the least expensive car for your new delivery service. You have two choices: the Scion xA, which will cost $13,000 to purchase and which will have OCF of −$1,200 annually throughout the vehicle's expected life of three years as a delivery vehicle; and the Toyota Prius, which will cost $23,000 to purchase and which will have OCF of −$550 annually throughout that vehicle's expected five-year life. Both cars will be worthless at the end of their life. If you intend to replace whichever type of car you choose with the same thing when its life runs out, again and again out into the foreseeable future, and if your business has a cost of capital of 16 percent, what is the difference in the EAC of the two cars?
Multiple Choice
• $586.07
• $428.04
• $381.36 In
• $601.51
15.
The net present value decision technique may not be the only pertinent unit of measure if the firm is facing:
Multiple Choice
• the election of a new board of directors.
• a major investment.
• a labor union.
• time or resource constraints.
16.
We accept projects with a positive NPV because it means that:
Multiple Choice
• we have recovered all our costs.
• we are creating wealth for shareholders.
• the project's expected return exceeds the cost of capital.
• all of the options.
17.
Neither payback period nor discounted payback period techniques for evaluating capital projects account for:
Multiple Choice
• time value of money.
• market rates of return.
• cash flows that occur during payback.
• cash flows that occur after payback.
18.
A project costs $91,000 today and is expected to generate cash flows of $11,000 per year for the next 20 years. The firm has a cost of capital of 8 percent. Should this project be accepted, and why?
Multiple Choice
• Yes, the project should be accepted since it has a NPV = $15,391.23.
• Yes, the project should be accepted since it has a NPV = $13,610.89.
• Yes, the project should be accepted since it has a NPV = $16,999.62.
• None of the options are .
19.
All of the following are strengths of payback EXCEPT:
Multiple Choice
• its benchmark is not determined by a relevant external constraint.
• it incorporates the time value of money.
• it uses a conservative reinvestment rate.
• none of the options.
20.
Compute the NPV for Project X and accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 10 percent.
Time: 0 1 2 3 4 5
Cash flow: −75 −75 0 100 75 50
Multiple Choice
• $14.22
• $12.93
• $62.07
• $136.90
21.
Which of the following statements is ?
Multiple Choice
• A weakness of both payback and discounted payback is that neither accounts for cash flows received after the payback.
• Discounted payback uses a more aggressive reinvestment rate assumption than payback.
• Neither payback nor discounted payback uses time value of money concepts.
• None of the statements are .
22.
Compute the NPV for Project X with the cash flows shown as follows if the appropriate cost of capital is 9 percent.
Time: 0 1 2 3 4 5
Cash flow: −1,000 −75 100 100 0 2,000
Multiple Choice
• $392.44
• $360.04
• −$639.96
• $486.29
23.
Compute the payback statistic for Project X and recommend whether the firm should accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 10 percent and the maximum allowable payback is five years.
Time: 0 1 2 3 4 5
Cash flow: −75 −75 0 100 75 50
Multiple Choice
• 3.67 years, accept
• 3.67 years, reject
• 4.67 years, accept
• 4.67 years, reject
24.
Compute the NPV statistic for Project U given the following cash flows if the appropriate cost of capital is 9 percent.
Project U
Time 0 1 2 3 4 5
Cash Flow –$ 1,000 $ 350 $ 1,480 –$ 520 $ 400 –$ 100
________________________________________
Multiple Choice
• $383.63
• $397.21
• $273.82
• $201.69
25.
The MIRR statistic is different from the IRR statistic in that:
Multiple Choice
• the MIRR uses weighted-average dollars.
• the MIRR assumes that the cash inflows can be reinvested at the cost of capital.
• the MIRR assumes that the cash inflows can be reinvested at the IRR.
• the MIRR uses input from the NPV whereas the IRR does not.
26.
Which rate-based decision statistic measures the excess return (the amount above and beyond the cost of capital for a project), rather than the gross return?
Multiple Choice
• Internal rate of return (IRR)
• Profitability index (PI)
• Net present value (NPV)
• Modified internal rate of return (MIRR)
27.
Compute the MIRR statistic for Project X and note whether the firm should accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 10 percent.
Time: 0 1 2 3 4 5
Cash flow: −175 75 0 100 75 50
Multiple Choice
• 15.73 percent, accept
• 13.26 percent, accept
• 13.89 percent, accept
• 13.26 percent, reject
28.
How many possible IRRs could you find for the following set of cash flows?
Time 0 1 2 3 4
Cash Flow –$ 201,000 –$ 37,350 $ 460,180 $ 217,020 –$ 5,000
________________________________________
Multiple Choice
• 3
• 2
• 1In
• 4
29.
Compute the IRR statistic for Project X and note whether the firm should accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 10 percent.
Time: 0 1 2 3 4 5
Cash flow: −75 −75 0 100 75 50
Multiple Choice
• 13.26 percent, reject
• 13.26 percent, accept
• 10 percent, accept
• 10 percent, reject
Prev
30.
Compute the MIRR for Project Y and accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 12 percent.
Time: 0 1 2 3 4 5
Cash flow: −5,000 1,000 1,000 0 2,000 2,000
Multiple Choice
• 7.62 percent, accept
• 47.09 percent, accept
• 7.62 percent, reject
• 47.09 percent, reject
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