Chaptert 10

Chaptert 10

University

22 Qs

quiz-placeholder

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Chaptert 10

Chaptert 10

Assessment

Quiz

English

University

Practice Problem

Medium

Created by

Mahra Ali مهرة علي

Used 2+ times

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22 questions

Show all answers

1.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Which of the following would not be considered a relevant cash flow when evaluating a new project?

Cost savings from using new equipment

Depreciation of an existing asset already in use

Additional revenue from the project

Initial investment in working capital

2.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

If a project's IRR is greater than the required return, what can you say about the NPV?

NPV is negative

NPV is zero

NPV is positive

It depends on the payback period

3.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What is the correct formula for Operating Cash Flow using the bottom-up approach?

EBIT + Depreciation – Taxes

Net Income + Depreciation

Sales – Costs – Taxes

(Sales – Costs)(1 – Tax) + Dep × Tax

4.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

A firm invests $100,000 in a project that saves $30,000 per year. Depreciation is $20,000/year, tax rate is 25%. What is annual OCF using the tax shield approach?

$22,500

$30,000

$27,500

$35,000

5.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Which of the following best describes the “stand-alone principle”?

Evaluate a project based on firm-wide earnings

Consider only net income when evaluating projects

Evaluate the project’s own cash flows as a mini-firm

Include sunk costs in the analysis

6.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

In an NPV calculation, how is salvage value handled?

Ignored

Subtracted in Year 0

Discounted and added to final year cash flow

Treated as depreciation

7.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

If a project requires a $20,000 investment in working capital and it’s recovered at the end, how should this appear in your cash flow table?

Subtracted every year

Added at the start, subtracted later

Subtracted at the start, added back at the end

Ignored entirely

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