8L for Shahimermaid Finance Q
blakli
8l_f.docxQuestion 1
1.
The value of resources used in an investment project should be measured in terms of their
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a. acquisition cost |
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b. historical cost |
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c. opportunity cost |
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d. depreciated cost |
0.4 points
Question 2
1.
When calculating the net cash flow in a project's expected final year,
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a. recovery of any working capital invested is disregarded |
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b. the after-tax salvage value of any project equipment is considered |
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c. the remaining principal on any borrowed funds is considered |
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d. the sales proceeds from any land associated with the project is disregarded |
0.4 points
Question 3
1.
Which of the following is not a major step in the capital budgeting process?
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a. generating investment project proposals |
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b. estimating cash flows |
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c. analyzing the effect of a project on the firm's financial ratios |
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d. performing a project post-audit and review |
0.4 points
Question 4
1.
Which of the following would not be classified as a capital expenditure for decision-making purposes?
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a. purchase of a building |
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b. investment in a management training program |
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c. purchase of 90-day Treasury Bills |
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d. development of a major advertising campaign |
0.4 points
Question 5
1.
When a firm sells an asset for ____, it realizes a capital gain and must pay income taxes on it.
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a. book value |
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b. less than book value |
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c. more than book value but less than original cost |
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d. more than its original cost |
0.4 points
Question 6
1.
The decision by the Municipal Transportation Authority to either refurbish existing buses, to buy new large buses, or to supplement the existing fleet with mini-buses is an example of:
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a. independent projects |
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b. mutually exclusive projects |
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c. contingent projects |
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d. separable projects |
0.4 points
Question 7
1.
Ten years ago J-Bar Company purchased a lathe for $250,000. It was being depreciated on a straight-line basis to an estimated $25,000 salvage value over a 15 year period. The firm is considering selling the old lathe and purchasing a new one. The new lathe would cost $500,000. The firm's marginal tax rate 40 percent. Determine the net investment required to purchase the new lathe, if the old lathe is sold for $100,000.
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a. $380,000 |
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b. $397,500 |
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c. $400,000 |
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d. $418,000 |
0.4 points
Question 8
1.
Which of the following is a basic principle when estimating a project's cash flows?
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a. cash flows should be measured on a pretax basis |
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b. cash flows should ignore depreciation because it is a non-cash charge |
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c. only direct effects of a project should be included in cash flow calculations |
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d. cash flows should be measured on an incremental basis |
0.4 points
Question 9
1.
The determination of net cash flows (NCF) should never include
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a. changes in depreciation |
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b. changes in operating costs |
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c. interest charges |
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d. indirect effects |
0.4 points
Question 10
1.
In Step Video is considering expanding its video rental library to 8,000 tapes. The purchase price of the additional videos will be $80,000 and the shipping cost is another $4,000. To house the tapes, the owner will have to spend another $10,000 for display shelves, increase net working capital by $5,000, and interest expenses will add another $8,000 to the operating cost. What is the net investment to In Step Video for this project?
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a. $95,000 |
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b. $99,000 |
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c. $84,000 |
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d. $107,000 |
0.4 points
Question 11
1.
There is neither a gain or a loss on the sale of a depreciable asset for an amount exactly equal to its ____.
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a. acquisition cost |
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b. tax book value |
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c. opportunity cost |
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d. historical cost |
0.4 points
Question 12
1.
An investment project is expected to generate earnings before taxes (EBT) of $60,000 per year. Annual depreciation from the project is $30,000 and the firm's tax rate is 40 percent. Determine the project's annual net cash flows.
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a. $48,000 |
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b. $66,000 |
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c. $36,000 |
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d. $52,000 |
0.4 points
Question 13
1.
The capital budgeting process is very important to the firm because it:
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a. highlights the impacts of a project on net income |
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b. essentially plots the company's future direction |
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c. is used in working capital analysis |
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d. indicates the net cash flows available for employee education |
0.4 points
Question 14
1.
Which of the following items is not considered as a part of the net investment calculation?
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a. the first year's net cash flow |
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b. increase in net working capital |
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c. salvage of an old piece of equipment that is being replaced |
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d. installation and shipping charges |
0.4 points
Question 15
1.
A term meaning that the firm has limited funds and must choose only those projects that will be profitable is:
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a. capital refunding |
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b. capital debt |
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c. capital rationing |
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d. capital choice |
