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- Download: http://solutionzip.com/downloads/20-mcq-cash-flow-can-be-said-to-equal-operating-income/
- Question 1 of 20
- Cash flow can be said to equal operating income
- A. less taxes plus depreciation.
- B. less taxes.
- C. before depreciation and taxes plus depreciation.
- D. after taxes minus depreciation.
- Question 2 of 20
- There are several disadvantages to the payback method; among them is that payback
- A. ignores the time value of money.
- B. emphasizes receiving money back as fast as possible for reinvestment.
- C. is easy to use and to understand.
- D. can be used in conjunction with time adjusted methods of evaluation.
- Question 3 of 20
- The Dammon Corp. has the following investment opportunities. Year Machine A Inflows ($15,000 investment) Machine B Inflows ($22,500 investment) Machine C Inflows ($37,500 investment) 1 $6,000 $12,000 $-0- 2 9,000 12,000 30,000 3 3,000 10,500 30,000 4 -0- 10,500 15,000 5 -0- -0- 15,000 Under the payback method and assuming these machines are mutually exclusive, which machine(s) would Dammon Corp. choose
- A. Machine A
- B. Machine B
- C. Machine C
- D. Machine A and B
- Question 4 of 20
- You buy a new piece of equipment for $5,535, and you receive a cash inflow of $1,000 per year for 8 years. What is the internal rate of return
- A. Less than 10%
- B. Between 10% and 11%
- C. Between 11% and 12%
- D. More than 12%
- Question 5 of 20
- Assuming that a firm has no capital rationing constraint and that a firm’s investment alternatives are not mutually exclusive, the firm should accept all investment proposals
- A. for which it can obtain financing.
- B. that have a positive net present value.
- C. that have positive cash flows.
- D. that provide returns greater than the after-tax cost of debt.
- Question 6 of 20
- The internal rate of return and net present value methods
- A. always give the same investment decision answer.
- B. never give the same investment decision answer.
- C. usually give the same investment decision answer.
- D. always give answers different from the payback method.
- Question 7 of 20
- The Net Present Value Method is a more conservative technique for selecting investment projects than the Internal Rate of Return method because the NPV method
- A. assumes that cash flows are reinvested at the project’s internal rate of return.
- B. concentrates on the liquidity aspects of investment projects.
- C. assumes that cash flows are reinvested at the firm’s weighted average cost of capital.
- D. None of the above
- Question 8 of 20
- Capital rationing
- A. is a way of preserving the assets of the firm over the long term.
- B. is a less than optimal way to arrive at capital budgeting decisions.
- C. assures stockholder wealth maximization.
- D. assures maximum potential profitability.
- Question 9 of 20
- An asset fitting into the 5-year MACRS category was purchased 2 years ago for $60,000. The book value of this asset is now
- A. $28,800.
- B. $31,200.
- C. $48,000.
- D. $60,000.
- Question 10 of 20
- In a replacement decision, if an old asset sells below book value, from a tax standpoint there is
- A. a decrease in cash flow.
- B. an increase in cash flow.
- C. no effect on cash flow.
- D. a decrease in net present value.
- Question 11 of 20
- The term risk averse means that
- A. an individual refuses to take risks.
- B. most investors and businessmen seek risk.
- C. an individual will seek to avoid risk or be compensated with a higher return.
- D. only investment proposals with no risk should be accepted.
- Question 12 of 20
- If one project has a higher standard deviation than another it
- A. has a greater risk.
- B. has a higher expected value.
- C. has more possible outcomes.
- D. may be riskier, but this can only be determined by the coefficient of variation.
- Question 13 of 20
- A project has the following projected outcomes in dollars $250, $350, and $500. The probabilities of their outcomes are 25%, 50%, and 25% respectively. What is the expected value of these outcomes
- A. $362.50
- B. $89.40
- C. $94.50
- D. $178.30
- Question 14 of 20
- Risk may be integrated into capital budgeting decisions by
- A. adjusting the standard deviation of possible outcomes.
- B. determining the expected value.
- C. adjusting the discount rate.
- D. adjusting the time horizon.
- Question 15 of 20
- Using the risk-adjusted discount rate approach, the cost of capital is applied to projects with __________ risk.
- A. normal
- B. high
- C. no
- D. low
- Question 16 of 20
- A Monte Carlo simulation model uses
- A. random variables as inputs.
- B. a point estimate.
- C. the cost of capital.
- D. portfolio risk.
- Question 17 of 20
- In order to reduce risk in a firm, the firm would seek to enter a business that has
- A. high positive correlation with its present business.
- B. zero correlation with its present business.
- C. high negative correlation with its present business.
- D. high negative variation with its present business.
- Question 18 of 20
- A correlation coefficient of __________ provides the greatest risk reduction.
- A. 0
- B. 1
- C. +1
- D. +.5
- Question 19 of 20
- A project that carries a normal amount of risk and does not affect the risk exposure of the firm should be discounted back at the
- A. coefficient of variation.
- B. beta.
- C. risk-free rate.
- D. weighted average cost of capital.
- Question 20 of 20
- The efficient frontier indicates alternatives with
- A. neutral combinations of risk and return.
- B. the highest returns.
- C. the best combination of risk and return.
- D. no risk.
- Download: http://solutionzip.com/downloads/20-mcq-cash-flow-can-be-said-to-equal-operating-income/
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