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finance homework mcq eco282

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Question;1. Preferably, cash;flows for a project are estimated as;a. Cash;flows before taxes B. Cash flows after taxes;c. Accounting;profits before taxes;d. Accounting;profits after taxes;2. When a;firm has the opportunity to add a project that will utilize excess factory;capacity (that is currently not being used), which costs should be used to;determine if the added project should be undertaken?;a. Opportunity;cost;b. Sunk cost;C. Incremental costs;d. None of;the above;3. The cost;of a resource that may be relevant to an investment decision even when no cash;changes hand is called a (an);a. Sunk cost;B. Opportunity cost;c. Working;capital;d. None of;the above;4. Net;Working Capital is the: I) Short-term assets II) Short term liabilities III);Long-term assets IV) Long term liabilities;a. I only;B. (I - II);c. (III -;I);d. (III -;IV);5. Investment;in net working capital is not depreciated because;a. It is not;a cash flow;B. It is recovered during or at the end of the project and;is not a depreciating asset;c. It is a;sunk cost;d. All of;the above;6. Net;Working Capital should be considered in project cash flows because: A. Firms;must invest cash in short-term assets to produce finished goods;b. They are;sunk costs;c. Firms;need positive NPV projects for investment;d. None of;the above;36;Junjie Liu ? Econ 282 Practice;Multiple Choice;7. Investment;in inventories includes investment in: I) Raw material II) Work-in-progress;III) Finished goods;a. I only;b. I and II;only;C. I, II, and III;d. III only;8. For;example, in case of an electric car project, the following cash flows should be;treated as incremental flows when deciding whether to go ahead with the project;except;a. The;consequent reduction in sales of the company's existing gasoline models (i.e.;incidental effects);B. Interest payment on debt;c. The;value of tools that can be transferred from the company's existing plants;d. The;expenditure on new plants and equipment;9. The;principal short-term assets are: I) Cash, II) Accounts receivable, III);Inventories and IV) Accounts Payable;a. I only;b. I and IV;only;C. I, II, and III;d. IV only;10. The value;of a previously purchased machine to be used by a proposed project is an;example of;a. Sunk cost;B. Opportunity cost;c. Fixed;cost;d. None of;the above;11. Money that;a firm has already spent or committed to spend regardless of whether a project;is taken is called;a. Fixed;cost;b. Opportunity;cost;C. Sunk cost;d. None of;the above;12. The cost;that is incurred as a result of past, irrevocable decisions and is irrelevant;to future decisions is called;a. Opportunity;cost;B. Sunk cost;c. Incremental;cost;d. None of;the above;37;Junjie Liu ? Econ 282 Practice;Multiple Choice;13. For;example, in the case of an electric car project, which of the following cash;flows should be treated as incremental flows when deciding whether to go ahead;with the project?;a. The cost;of research and development undertaken for developing the electric car in the;past three years;b. The;annual depreciation charge;C. Tax savings resulting from the depreciation charges;d. Dividend payments;14. In the;case of freely traded resources, opportunity cost is the;a. Book;value B. Market value;c. Historical;value;d. None of;the above;15. If the;discount rate is stated in nominal terms, then in order to calculate the NPV in;a consistent manner requires that project: I) cash flows be estimated in;nominal terms II) cash flows be estimated in real terms III) accounting income;be used;A. I only;b. II only;c. III only;d. None of;the above;16. If the;discount rate is stated in real terms, then in order to calculate the NPV in a;consistent manner requires that project: I) cash flows be estimated in nominal;terms II) cash flows be estimated in real terms III) accounting income be used;a. I only;B. II only;c. III only;d. None of;the above;17. A firm;owns a building with a book value of $150,000 and a market value of $250,000.;If the building is utilized for a project, then the opportunity cost ignoring;taxes is;a. $100,000;b. $150,000;C. $250,000;d. None of;the above;18. The real;interest rate is 3% and the inflation rate is 5%. What is the nominal interest;rate?;a. 3%;b. 5%;C. 8.15% d. 2%;38;Junjie Liu ? Econ 282 Practice;Multiple Choice;19. If the;nominal interest rate is 7. 5% and the inflation rate is 4%, what is the real;interest rate?;a. 4%;b. 9.5%;C. 3.4%;d. None of;the above;20. A cash;flow received in two years is expected to be $10,816 in nominal terms. If the;real rate of interest is 2% and the inflation rate is 4%, what is the real cash;flow for year-2?;a. $11,236;b. $10,816;C. $10,000 d. $9,246;21. Given the following data for Project M;Real discount rate = 5% Nominal discount rate = 10%;Calculate the NPV of the project: A. $51.70;b. $35.54 c. $45.21;d. None of the above;22. Given the following data for Project M;Real discount rate = 5% Nominal discount rate = 10%;Calculate the NPV of the project: a. $25.85;B. $17.77 c. $22.65;d. None of the above;23. The real rate of interest is 3% and the inflation is 4%.;What is the nominal rate of interest? a. 3%;b. 4% C. 7.12% d. 1%;39;Junjie Liu ? Econ 282 Practice;Multiple Choice;24. The NPV;value obtained by discounting nominal cash flows using the nominal discount;rate is the: I) same as the NPV value obtained by discounting real cash flows;using the real discount rate II) same as the NPV value obtained by discounting;real cash flows using the nominal discount rate III) same as the NPV value;obtained by discounting nominal cash flows using the real discount rate;A. I only;b. II only;c. III only;d. II and;III only

 

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