Finance and Investment Quiz

Which component is not a major cash flow component in a project?

• Initial Investment

• Operating Cash Inflows

• Terminal Cash Flow

• Sunk Costs

In capital budgeting, which decision is more straightforward?

• Replacement decisions

• Expansion decisions

• Sunk cost evaluation

• International investment

Calculate the book value of an asset purchased for $100,000 with accumulated depreciation of $52,000.

• $48,000

• $52,000

• $100,000

• $152,000

XYZ Industries purchased an asset for $100,000. Four years latter, the company sells the asset for $110,000 with a book value of $48,000. What is the gain?

• $62,000

• $110,000

• $52,000

• $158,000

What type of risk is associated with cash flows occurring in foreign currencies?

• Political Risk

• Exchange Rate Risk

• Operational Risk

• Credit Risk

Which of the following should be ignored when calculating a project's incremental cash flows?

• Sunk Costs

• Opportunity Costs

• Tax Implications

• Terminal Cash Flow

What is the purpose of scenario analysis in capital budgeting?

• To estimate risk

• To calculate tax savings

• To determine book value

• To manage cash flows

Determine the after-tax proceeds if an old asset is sold for $280,000 with a book value of $100,000 and a tax rate of 40%.

• $208,000

• $144,000

• $180,000

• $280,000

Which of the following is a real option in project management?

• Delaying the project

• Increasing initial investment

• Ignoring depreciation

• Reducing tax rate

What does a negative NPV indicate about a project?

• Project is profitable

• Project should be rejected

• Project has no risk

• Project is tax-free