Corporate Finance Study Set 12

Business

Quiz 8 :

Net Present Value and Capital Budgeting

Quiz 8 :

Net Present Value and Capital Budgeting

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Changes in the net working capital:
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A

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One of the key differences between corporate finance and financial accounting courses is:
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A

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Bluedo's has sales of $435,000, depreciation of $35,000, and net working capital of $56,000. The firm has a tax rate of 34% and a profit margin of 8%. The firm has no interest expense. What is the amount of the operating cash flow?
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C

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Interest expense is typically excluded in the project cash flow because:
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A firm purchases a new truck for $30,000. It will be depreciated over 5 years at $6,000 per year. If the tax rate is 30% what is the time 0 cash flow?
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A decrease in a firm's current cash flows resulting from the implementation of a new project is referred to as:
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A project will produce an operating cash flow of $7,300 a year for three years. The initial cash investment in the project will be $11,600. The net after-tax salvage value is estimated at $3,500 and will be received during the last year of the project's life. What is the net present value of the project if the required rate of return is 11%?
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A reduction in the sales of an existing product caused by the introduction of a new product is an example of a(n):
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The QT Company is generating cash flow of $333,000 per year. If they invest in a new press they expect to increase their cash flow to $400,000 per year. The cash outflow for the new press is $250,000; to accept or reject the investment they have to consider:
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Money that the firm has already spent or is committed to spend regardless of whether a project is taken is called a(n):
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The cash flow in dollars received in year 3 is expected to be $12,372. The firm uses a real discount rate of 4% and the inflation rate is expected to be 2.5%. What is the present value of the year 3 cash flow?
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What is the inflation rate given a nominal interest rate is 13% when the real rate is 6%?
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The value of a previously purchased building used by a proposed project is an example of a(n):
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You spent $500 last week fixing the 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.
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A cost that has already been paid, or the liability to pay has already been incurred, is a(n):
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Sales for year 2 of the new project are expected to increase by 10%. Current assets are expected to increase by 17% for every dollar increase in sales while accounts payable are expected to increase by 6%. For year 2 the change in cash flows due to working capital will be:
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Peter's Boats has sales of $760,000 and a profit margin of 5%. The annual depreciation expense is $80,000. What is the amount of the operating cash flow if the company has no long-term debt?
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What is the nominal rate of interest given a real rate of interest of 5% and an inflation rate of 7%?
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The cash flow in dollars received in year 3 is expected to be $12,372. The firm uses a real discount rate of 4% and the inflation rate is expected to be 2.5%. What is the real cash flow for year 3?
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Le Place has sales of $439,000, depreciation of $32,000, and net working capital of $56,000. The firm has a tax rate of 34% and a profit margin of 6%. The firm has no interest expense. What is the amount of the operating cash flow?
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