BBPW 3103 Mar 2020

________ is the process of evaluating and selecting long-term investments consistent with the firm's goal of owner wealth maximization.

• Recapitalizing assets

• Capital budgeting

• Ratio analysis

• Restructuring debt

A conventional cash flow pattern associated with capital investment projects consists of an initial

• outflow followed by a broken cash series.

• inflow followed by a broken series.

• outflow followed by a series of inflows.

• inflow followed by a series of outflows

________ is a series of equal annual cash flows.

• A mixed stream

• A conventional

• A non-conventional

• An annuity

Projects that compete with one another, so that the acceptance of one eliminates the others from further consideration are called

• independent projects.

• mutually exclusive projects.

• replacement projects.

• none of the above

The ________ measures the amount of time it takes the firm to recover its initial investment.

• average rate of return

• internal rate of return

• net present value

• payback period

A firm is evaluating a proposal which has an initial investment of RM50,000 and has cash flows of RM15,000 per year for five years. The payback period of the project is

• 1.5 years.

• 2 years.

• 3.3 years.

• 4 years.

A firm is evaluating three capital projects. The net present values for the projects are as follows:

Project 1 RM100

Project 2 RM0

Project 3 - RM100

• accept Projects 1 and 2 and reject Project 3.

• accept Projects 1 and 3 and reject Project 2.

• accept Project 1 and reject Projects 2 and 3.

• reject all projects.

What is the NPV for the following project if its cost of capital is 0 percent and its initial after tax cost is RM5,000,000 and it is expected to provide after-tax operating cash inflows of RM1,800,000 in year 1, RM1,900,000 in year 2, RM1,700,000 in year 3 and RM1,300,000 in year 4?

• RM1,700,000

• RM371,764

• RM137,053

• None of the above

What is the payback period for Tangshan Mining company's new project if its initial after tax cost is RM5,000,000 and it is expected to provide after-tax operating cash inflows of RM1,800,000 in year 1, RM1,900,000 in year 2, RM700,000 in year 3 and RM1,800,000 in year 4?

• 4.33 years

• 3.33 years

• 2.33 years

• None of the above

Net working capital is defined as

• a ratio measure of liquidity best used in cross-sectional analysis.

• the portion of the firm's assets financed with short-term funds

• current liabilities minus current assets.

• current assets minus current liabilities.