Project Evaluation

What is profit?

What is cash flow?

What is the difference between positive and negative cash flow?

What is profit?

• Adding costs to revenue: Profit= Revenue+Costs

• the balance that remains when all of a business's operating expenses are subtracted from its revenue

• Ignoring costs altogether: Profit=Revenue

• Subtracting revenue from costs: Profit=Revenue−Costs

• Multiplying revenue and costs: Profit=Revenue×Costs

What is cash flow?

• cash flow is the net balance of cash moving in and out of the business at a specific point in time

• cash flow is the money that a business earns during a specific period in time

• cash flow is the balance that a business reamains at a specific period in time

What is the WACC

Cost of capital usually is expressed

• In percentage terms, as a percentage of the face value of the investment.

• In percentage terms, as a percentage of the amount invested.

Cost of capital for an acquisition or a project is a function of:

• The company's marginal overall cost of capital.

• The company's average overall cost of capital.

• The investment (the use to which the capital is put).

• The company's marginal cost of equity capital.

Which of the following terms are often (properly) interchangeable?

• Cost of capital and discount rate but not required rate of return.

• Cost of capital, discount rate, and required rate of return.

• Cost of capital and required rate of return but not discount rate.

• Required rate of return and discount rate but not cost of capital.

Which of the following is a correct statement?

• Cost of capital is based on market value and usually is stated in nominal terms.

• Cost of capital is based on book value and usually is stated in nominal terms.

• Cost of capital is based on book value and usually is stated in real terms.

• Cost of capital is based on market value and usually