Chapter 09 - Making Capital Investment Decisions
33. Firm A uses straight-line depreciation. Firm B uses MACRS depreciation. Both firms
bought $60,000 worth of equipment last year. Both firms are in the 35 percent tax bracket. The operating cash flows for each firm are identical except for the depreciation effects. Given this, you know the:
A. depreciation expense for Firm A will be greater than Firm B's expense every year.
B. equipment has a higher value on Firm B's books than on Firm A's at the end of year two. C. operating cash flow of Firm A is less than that of Firm B for year two.
D. market value of Firm A's equipment is greater than the market value of Firm B's equipment. E. market value of Firm B's equipment is greater than the market value of Firm A's equipment.
34. Assume a firm has positive net earnings. The operating cash flow of this firm: A. ignores both depreciation and taxes.
B. is unaffected by the depreciation expense. C. must be negative.
D. increases when tax rates decrease.
E. is equal to net income minus depreciation.
35. The operating cash flows of a project:
A. are unaffected by the depreciation method selected. B. are equal to the project's total projected net income. C. decrease when net working capital increases. D. include any aftertax salvage values. E. include erosion effects.
36. The tax shield approach to computing the operating cash flow, given a tax-paying firm: A. ignores both interest expense and taxes. B. separates cash inflows from cash outflows.
C. considers the changes in net working capital resulting from a new project. D. is based on the fact that depreciation does not affect the operating cash flows. E. recognizes that depreciation creates a cash inflow.
9-11
Chapter 09 - Making Capital Investment Decisions
37. Which one of the following will increase the operating cash flow as computed using the tax shield approach?
A. Decrease in depreciation B. Decrease in sales
C. Increase in variable costs D. Decrease in fixed costs E. Increase in the tax rate
38. Scenario analysis is best described as the determination of the: A. most likely outcome for a project. B. reasonable range of project outcomes.
C. variable which has the greatest effect on a project's outcome.
D. effect that a project's initial cost has on the project's net present value.
E. change in a project's net present value given a stated change in projected sales.
39. Which one of the following is a correct value to use if you are conducting a best case scenario analysis?
A. Sales price that is most likely to occur B. Lowest expected level of sales quantity C. Lowest expected salvage value
D. Highest expected need for net working capital E. Lowest expected value for fixed costs
40. Scenario analysis asks questions such as:
A. How will changing the number of units sold affect the outcome of this project? B. What is the best outcome that should reasonably be expected?
C. How much will a $1 increase in the variable cost per unit change the net present value? D. Will the net present value increase or decrease if the quantity sold increases by 100 units? E. How will the operating cash flow change if the depreciation method is changed?
9-12
Chapter 09 - Making Capital Investment Decisions
41. Scenario analysis:
A. determines the impact a $1 change in sales has on the internal rate of return.
B. determines which variable has the greatest impact on a project's net present value.
C. helps determine the reasonable range of expectations for a project's anticipated outcome. D. evaluates a project's net present value while sensitivity analysis evaluates a project's internal rate of return.
E. determines the absolute worst and absolute best outcome that could ever occur.
42. Sensitivity analysis:
A. looks at the most reasonably optimistic and pessimistic results for a project.
B. helps identify the variable within a project that presents the greatest forecasting risk.
C. is used for projects that cannot be analyzed by scenario analysis because the cash flows are unconventional.
D. is generally conducted prior to scenario analysis just to determine if the range of potential outcomes is acceptable.
E. illustrates how an increase in operating cash flow caused by changing both the revenue and the costs simultaneously will change the net present value for a project.
43. Turner Industries started a new project three months ago. Sales arising from this project are exceeding all expectations. Given this, which one of the following is management most apt to implement?
A. Option to wait B. Soft rationing C. Strategic option D. Option to abandon E. Option to expand
44. Ignoring the option to wait:
A. may overestimate the internal rate of return on a project. B. may underestimate the net present value of a project.
C. ignores the ability of a manager to increase output after a project has been implemented. D. is the same as ignoring all strategic options.
E. ignores the value of discontinuing a project early.
9-13
Chapter 09 - Making Capital Investment Decisions
45. Which of the following have the potential to increase the net present value of a proposed investment?
I. ability to immediately shut down a project should the project become unprofitable II. ability to wait until the economy improves before making the investment
III. option to place the investment on hold until a more favorable discount rate becomes available
IV. option to increase production beyond that initially projected A. I only
B. I and IV only C. II and III only D. I, II, and IV only E. I, II, III, and IV
46. The ability to delay an investment:
A. is commonly referred to as the best case scenario.
B. is valuable provided there are conditions under which the investment will have a positive net present value.
C. ensures that the investment will have an expected net present value that is positive. D. offsets the need to conduct sensitivity analysis. E. is referred to as the option to abandon.
47. Nu Tek is comprised of four separate operating divisions. For this year, the firm has decided to allocate capital funds using a soft rationing approach. Which one of the following applies to this situation?
A. Division managers will be limited to accepting a single new project each.
B. Division managers are being given blanket approval to accept all positive net present value projects.
C. Divisions managers will vie with each other for additional capital allocations.
D. Division managers will not receive any funding for new projects but will be allowed to expand current operations.
E. Division managers will not receive capital funding for any project.
9-14
Chapter 09 - Making Capital Investment Decisions
48. Which one of the following statements is correct when a firm faces hard rationing? A. All positive net present value projects will be accepted.
B. Each division within a firm will be allocated an amount for capital expenditures that will be less than the total value of its positive net present value projects. C. The firm does not have funds to finance any new projects.
D. The firm will fund only those projects that create value for its shareholders.
E. The firm will only finance the projects which have the highest profitability index values.
49. The Green Shingle purchased a parcel of land 6 years ago for $299,500. At that time, the firm invested $64,000 grading the site so that it would be usable. Since the firm wasn't ready to use the site itself at that time, it decided to lease the land for $28,000 a year. The Green Shingle is now considering building a hotel on the site as the rental lease is expiring. The current value of the land is $347,500. The firm has no loans or mortgages secured by the property. What value should be included in the initial cost of the hotel project for the use of this land? A. $0
B. $299,500 C. $347,500 D. $363,500 E. $411,500
50. Six years ago, Global Exporters paid cash for a new packaging machine that cost $287,000. Three years ago, the firm spent $2,900 on repairs and modifications to the machine. The
machine is now fully depreciated and has just sat idly in a back corner of the shop for the past 7 months. The estimated value of the machine today is $124,500. The firm is considering using this machine in a new project. If it does so, what value should be assigned to this machine and included in the initial costs of the new project? A. $0 B. $2,900 C. $124,500 D. $127,400 E. $143,500
9-15
百度搜索“77cn”或“免费范文网”即可找到本站免费阅读全部范文。收藏本站方便下次阅读，免费范文网，提供经典小说综合文库公司理财精要第九章题库(3)在线全文阅读。
相关推荐：