Está en la página 1de 7

1.

The objective of a firm’s management is to only undertake the projects that the
Market value of shareholders' equity.

a) Decay
b) Do not decrease
c) Change
d) Do not change
Answer: (b)

2. The decision rule that management uses with the net present value is to undertake only those
Projects with NPV.
a) a discounted
b) a contingent
c) a positive
d) Negative
Answer: (c)

3. If a firm decides to invest in automated machines that will allow the firm to reduce labor
Costs, this is an example of a capital expenditures project.

a) New products
b) Replacement of existing assets
c) Cost reduction
d) Advertising
Answer: (c)

4. The NPV of a project represents the amount by which it is expected to increase


a) The break-even point
b) Capital budgeting
c) Capital expenditures
d) Shareholder wealth
Answer: (d)

5. A negative sign in front of a cash-flow forecast for a particular year means that it is an

a) Inflow
b) Outflow
c) Indeterminate flow
d) More information is required to make this determination
Answer: (b)

6. Net cash inflows from operations can be computed in which of the following ways?
a) Cash Flow = Revenue - Cash Expenses - Taxes
b) Cash Flow = Net Income + Noncash Expenses
c) Cash Flow = Revenue - Total Expenses - Taxes + Noncash Expenses
d) All of the above
Answer: (d)

7. Consider the development of a new type of laptop machine. That you will sell 5,000 laptop units per
year at a price of $2,500 per laptop. Production Equipment will have to be purchased at a cost of $2
million. The equipment will be Depreciated over five years using the straight-line method. Net working
capital of $1.9 Million will also required to finance this project. The cash expenses for this project are
$1,700 Per laptop. The tax rate is 40%. Compute the net cash inflows from operations.

a) $4 million
b) $2.56 million
c) $2.16 million
d) $1.76 million
Answer: (b)

8. Refer to question 9. What is the annual depreciation amount for this project?

a) $4 million
b) $1 million
c) $0.78 million
d) $0.4 million
Answer: (d)

9. Refer to question 9. If we use a cost of capital equal to 13%, what is the NPV for this project?
a) $2.3 million
b) $3.7 million
c) $5.1 million
d) $9 million
Answer: (c)

10. In computing a project's cost of capital the risk to use is

a) The risk of the financing instruments used to fund the project


b) The risk of the proj ect's cash flows
c) a risk-free rate
d) a historical risk rate using T-bills
Answer: (b)
11. A capital budgeting project's cost of capital should reflect only the risk of the
Project; not the project's risk.
a) Unsystematic: systematic
b) Unsystematic: market-related
c) Systematic; unsystematic
d) Systematic: market-related
Answer: (c)

12. The point of indifference between accepting and rejecting a project is referred to as the
point.
a) Payback
b) NPV
c) Reject
d) Break-even
Answer: (d)

13. Consider a project that has total fixed costs of $400,p000: an annual depreciation (based on the
Straight-line method) of $150,000, annual cash flows of $255,000 and a tax rate of 34%. The
Difference between the revenue and variable cost (on a per unit basis) is $1,600 (so we use
1,600Q). Determine the break-even volume for this project.

a) Q = 443 units
b) Q = 349 units
0) Q = 230 units
d) Q = 194 units
Answer: (b)

14. For a project, an initial cash outlay of $1.4 million is made. In year 1 the deemed annual
Cash flow is $900,000, years 2-5 the expected annual cash flow is $1,000,000 and in year 6
The expected annual cash flow is $1.3 million. A cost of capital of 15% is used. The IR
(internal rate of return) is

a) 72.1%
b) 65.8%
c) 51.7%
d) 40.0%
Answer: (b)

15. An initial cash outlay of $1.4 million is made for a capital budgeting project. In year 1, the
Expected annual cash flow is $900,000, years 2-5, the expected annual cash flow is
$1,000,000 and in year 6, the expected annual cash flow is $1.3 million. If a cost of capital of
15 % is used, compute the NPV of this project.
a) $1,800,000
b) $2,100,000
c) $2,427,225
d) $3,296,790
Answer: (c)

16. The is defined as the annual cash payment that has a present value equal to the
Initial outlay.

a) Annualized cost of debt


b) Cost of debt
c) Cost of financing
d) Annualized capital cost
Answer: (d)

17. Project A has an initial $3.5 million capital outlay which is converted into an equivalent
Seven year annuity at a discount rate of 12% per year. Project B has a $7 million initial capital
Outlay and will last for 14 years. Project B has the same discount rate as Project A. What is
The preferred alternative based on the annualized capital cost?

a) Project A; its annualized capital cost = $528,050


b) Project A; its annualized capital cost = $766,912
c) Project B; its annualized capital cost = $1,056,099
d) Project B; its annualized capital cost = $1,533,524
Answer: (b)

18. comparing alternative annualized capital costs; the altemative with the
Annualized capital cost is the preferred altemative.

a) Lowest
b) Highest
c) Zero
d) Amortized
Answer: (a)

19. A project in IRR is its scale, which makes IRR not a good measure for ranking
Transparency exclusive projects.

a) Contgent on
b) Independent of
c) Inversely proportional to
d) Half of
Answer: (b)

20. A________________ rate is the rate that prevails in a zero-inflation scenario. The____________ rate
is the rate that one actual observes.

a) Nominal, inflation
b) Real, expected
c) Nominal, real
d) Real,nominal
Answer: (d)

21. The nominal rate of interest is 16% and the expected rate of inflation is 5%. Compute the
Real rate of cost of capital.

a) 21.8%
b) 11.5%
c) 11%
d) 10.5%
Answer: (d)

22. The nominal rate of interest is 15.7% and the expected rate of inflation is 6%. Compute the
Real rate of return.

a) 22.6%
b) 10.9%
c) 9.15%
d) 7.85%
Answer: (c)

23. How can NPV be properly calculated?

a) By using the nominal cost of capital to discount nominal cash flows


b) By using the real cost of capital to discount real cash flows
c) Neither (a) nor (b)
d) Both (a) and (b)
Answer: (d)

24. Apex Corporation is considering the purchase of Zenith Corporation. The owners of Zenith
Corporation are asking $75 million in cash and the managers of Apex Corporation estimate
That, once under their control, Zenith Corporation will generate cash flows of $20 million per
Year for five years. The cash flows are net of taxes. The IRR of this investment is
a) 8.17%
b) 10.42%
c) 15.34%
d) 20%
Answer: (b)

25. BGB Corporations is considering a project that will pay nothing for the first three years,
$80,000 in the fourth year, $120,000 in the fifth year, and $160,000 in the sixth year. The
Appropriate discount rate is 8.8% and the project requires an investment tomorrow of
$150,000 if we accept the project. The NPV of this project is:

a) $149,135
b) $124,939
c) $94,901
d) $82,263
Answer: (d)

Use this for questions 26-29


NetProducts Inc. is about installing a new server. The new machine costs $61,000 and is expected to
have a useful economic life of 5 years, after which it will have a book value of $0. In Addition to the
equipment costs, management expects installation costs of $9,000 and an initial Outlay for net working
capital of $7,000. The new server is expected to generate an additional $16,000 per year in earnings
after tax over Its Useful Life, But An Additional $4,000 Per Year Is Required In Net Working Capital. The
Net Working capital will be recovered by the end of the fifth year. NetProducts Inc. has cost of capital (k)
of 20%.
38.

26. What is the net cash flow in year 1?

a) $12,000
b) $26,000
c) $30,000
d) $34,000
Answer: (b)

27. What is the total cash flow in year 5?


a) $26,000
b) $30,000
c) $46,000
d) $53,000
Answer: (d)
28. What is the NPV of this project?
a) $11,606.59
b) $8,793.45
c) $5,176.55
d) $755.90
Answer: (a)

29. What is the IRR of this project?


a) 30.03%
b) 26.01%
c) 22.88%
d) 20.45%
Answer: (b)

También podría gustarte