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Busn 379 Final Exam

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BUSN 379 Final Exam

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1. (TCO 4) Which of the following is true regarding the evaluation of projects? (Points: 4)
2. (TCO 4) Which of the following investment ranking methods does not consider the time value of money? (Points: 4)
3. (TCO 3 and 4) The net present value is: (Points: 4)
4. (TCO 3 and 4) What is the net present value of a project with the following cash flows, if the discount rate is 10 percent?

5. (TCO 4) Leward Manufacturing is spending $115,000 to update its equipment. This is necessary if the firm wishes to be competitive in the marketplace and provide a wide array of product models. The company estimates that these updates will improve its cash inflows by $27,500 a year, for eight years. What is the payback period? (Points: 4)
6. (TCO 4) Ignoring the option to expand: (Points: 4)
overestimates the internal rate of return on a project.
7. (TCO 4) ___________, occurs when a firm cannot raise financing for a project under any circumstances. (Points: 4)
8. (TCO 4) ABC Cameras is considering an investment that will have a cost of $10,000 and the following cash flows: $6,000 in year 1, $4,000 in year 2 and $3,000 in year 3. Assume the cost of capital is 10%. Which of the following is true regarding this investment? (Points: 4)

9. (TCO 4) Assume Company X plans to invest $60,000 in industrial equipment. Using Tables 9.6 and 9.7 of your textbook (Page 277), which is the first year depreciation amount under MACRS? (Points: 4)
10. (TCO 1 and 4) Assume a project has earnings before depreciation and taxes of $120,000, depreciation of $40,000, and that the firm has a 30 percent tax bracket. What are the after-tax cash flows for the project? (Points: 4)

11. (TCO 8) Which of the following factors will affect the expected rate of return on a security? (Points: 4)

12. (TCO 8) Which statement is not true regarding risk? (Points: 4)
the expected return...


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