WorksheetsFinance II - Cash Flow analysis
Total questions: 11
Worksheet time: 8mins
What is the basis for capital budgeting decisions?
Net income
Cash flows
Gross profit
Depreciation
Why are financing costs not included in capital budgeting cash flows?
They are not significant.
They are already included in the required rate of return.
They are difficult to calculate.
They are only relevant for equity financing
How should the salvage value of an asset be treated at the end of a project?
Ignored
Added to the final year's cash flow
Depreciated over the project’s duration
Subtracted from the project’s initial cost
What is the formula to compute Net Present Value (NPV)?
NPV = Total Cash Inflows - Total Cash Outflows
NPV =Present Value of Cash Inflows - Present Value of Cash Outflows
NPV = Future Value of Cash Inflows - Initial Investment
NPV = initial investment - Future Value of Cash Inflows
Which of the following is not considered when calculating the initial investment (I0)?
Land purchase cost
Net working capital
Depreciation expense
Cost of industrial equipment
What is the initial investment (I0) if a project requires purchasing land for 100,000 TND, a building for 150,000 TND, a truck for 80,000 TND, industrial equipment for 50,000 TND, and net working capital of 30,000 TND?
310,000
380,000
410,000
430,000
If a project's annual sales are 150,000 TND, variable costs are 50,000 TND, and fixed operating costs including depreciation and amortization are 40,000 TND, what is the operating income before taxes?
60,000 TND
50,000 TND
40,000 TND
30,000 TND
If the book value of a building at the end of a project is 112,500 TND and its salvage value is 120,000 TND, what is the tax loss from the long-term asset if the tax rate is 30%?
2,250 TND
2,500 TND
2,850 TND
3,000 TND
Does the inclusion of financing costs in both the cash flows and the discount rate result in double-counting these costs in capital budgeting analysis?
True
False
If a piece of land is purchased for 140,000 TND and it appreciates at an annual rate of 4%, what will be its salvage value at the end of 5 years?
160,000 TND
175,000 TND
186,350.250 TND
170,331.406 TND
