公司理财英文版题库8.doc
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公司理财英文版题库8.doc
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CHAPTER8
MakingCapitalInvestmentDecisions
I. DEFINITIONS
INCREMENTALCASHFLOWS
a 1. Thechangesinafirm’sfuturecashflowsthatareadirectconsequenceofacceptingaprojectarecalled_____cashflows.
a. incremental
b. stand-alone
c. after-tax
d. netpresentvalue
e. erosion
Difficultylevel:
Easy
EQUIVALENTANNUALCOST
e 2. Theannualannuitystreamofpaymentswiththesamepresentvalueasaproject’scostsiscalledtheproject’s_____cost.
a. incremental
b. sunk
c. opportunity
d. erosion
e. equivalentannual
Difficultylevel:
Easy
SUNKCOSTS
c 3. Acostthathasalreadybeenpaid,ortheliabilitytopayhasalreadybeenincurred,isa(n):
a. salvagevalueexpense.
b. networkingcapitalexpense.
c. sunkcost.
d. opportunitycost.
e. erosioncost.
Difficultylevel:
Easy
OPPORTUNITYCOSTS
d 4. Themostvaluableinvestmentgivenupifanalternativeinvestmentischosenisa(n):
a. salvagevalueexpense.
b. networkingcapitalexpense.
c. sunkcost.
d. opportunitycost.
e. erosioncost.
Difficultylevel:
Easy
EROSIONCOSTS
e 5. Thecashflowsofanewprojectthatcomeattheexpenseofafirm’sexistingprojectsarecalled:
a. salvagevalueexpenses.
b. networkingcapitalexpenses.
c. sunkcosts.
d. opportunitycosts.
e. erosioncosts.
Difficultylevel:
Easy
PROFORMAFINANCIALSTATEMENTS
a 6. Aproformafinancialstatementisonethat:
a. projectsfutureyears’operations.
b. isexpressedasapercentageofthetotalassetsofthefirm.
c. isexpressedasapercentageofthetotalsalesofthefirm.
d. isexpressedrelativetoachosenbaseyear’sfinancialstatement.
e. reflectsthepastandcurrentoperationsofthefirm.
Difficultylevel:
Easy
MACRSDEPRECIATION
b 7. ThedepreciationmethodcurrentlyallowedunderUStaxlawgoverningtheacceleratedwrite-offofpropertyundervariouslifetimeclassificationsiscalled_____depreciation.
a. FIFO
b. MACRS
c. straight-line
d. sum-of-yearsdigits
e. curvilinear
Difficultylevel:
Easy
DEPRECIATIONTAXSHIELD
c 8. Thecashflowtaxsavingsgeneratedasaresultofafirm’stax-deductibledepreciationexpenseiscalledthe:
a. after-taxdepreciationsavings.
b. depreciablebasis.
c. depreciationtaxshield.
d. operatingcashflow.
e. after-taxsalvagevalue.
Difficultylevel:
Easy
CASHFLOW
d 9. Thecashflowfromprojectsforacompanyiscomputedasthe:
a. netoperatingcashflowgeneratedbytheproject,lessanysunkcostsanderosioncosts.
b. sumoftheincrementaloperatingcashflowandafter-taxsalvagevalueoftheproject.
c. netincomegeneratedbytheproject,plustheannualdepreciationexpense.
d. sumoftheincrementaloperatingcashflow,capitalspending,andnetworkingcapitalexpensesincurredbytheproject.
e. sumofthesunkcosts,opportunitycosts,anderosioncostsoftheproject.
Difficultylevel:
Medium
II. CONCEPTS
PROFORMAINCOMESTATEMENT
b 10. Theproformaincomestatementforacostreductionproject:
a. willreflectareductioninthesalesofthefirm.
b. willgenerallyreflectnoincrementalsales.
c. hastobepreparedreflectingthetotalsalesandexpensesofafirm.
d. cannotbepreparedduetothelackofanyprojectrelatedsales.
e. willalwaysreflectanegativeprojectoperatingcashflow.
Difficultylevel:
Easy
INCREMENTALCASHFLOW
b 11. Onepurposeofidentifyingalloftheincrementalcashflowsrelatedtoaproposed
projectisto:
a. isolatethetotalsunkcostssotheycanbeevaluatedtodetermineiftheprojectwill
addvaluetothefirm.
b. eliminateanycostwhichhaspreviouslybeenincurredsothatitcanbeomittedfrom
theanalysisoftheproject.
c. makeeachprojectappearasprofitableaspossibleforthefirm.
d. includeboththeproposedandthecurrentoperationsofafirmintheanalysisofthe
project.
e. identifyanyandallchangesinthecashflowsofthefirmforthepastyearsotheycan beincludedintheanalysis.
Difficultylevel:
Medium
INCREMENTALCASHFLOW
e 12. Whichofthefollowingareexamplesofanincrementalcashflow?
I. anincreaseinaccountsreceivable
II. adecreaseinnetworkingcapital
III. anincreaseintaxes
IV. adecreaseinthecostofgoodssold
a. IandIIIonly
b. IIIandIVonly
c. IandIVonly
d. I,III,andIVonly
e. I,II,III,andIV
Difficultylevel:
Medium
INCREMENTALCASHFLOW
c 13. Whichoneofthefollowingisanexampleofanincrementalcashflow?
a. theannualsalaryofthecompanypresidentwhichisacontractualobligation
b. therentonawarehousewhichiscurrentlybeingutilized
c. therentonsomenewmachinerythatisrequiredforanupcomingproject
d. thepropertytaxesonthecurrentlyownedwarehousewhichhasbeensittingidlebut isgoingtobeutilizedforanewproject
e. theinsuranceonacompany-ownedbuildingwhichwillbeutilizedforanewproject
Difficultylevel:
Medium
INCREMENTALCOSTS
d 14. Projectanalysisisfocusedon_____costs.
a. sunk
b. total
c. variable
d. incremental
e. fixed
Difficultylevel:
Medium
SUNKCOST
c 15. Sunkcostsincludeanycostthat:
a. willchangeifaprojectisundertaken.
b. willbeincurredifaprojectisaccepted.
c. haspreviouslybeenincurredandcannotbechanged.
d. ispaidtoathirdpartyandcannotberefundedforanyreasonwhatsoever.
e. willoccurifaprojectisacceptedandonceincurred,cannotberecouped.
Difficultylevel:
Easy
SUNKCOST
d 16. Youspent$500lastweekfixingthetransmissioninyourcar.Now,thebrakesare
actingupandyouaretryingtodecidewhethertofixthemortradethecarinfora
newermodel.Inanalyzingthebrakesituation,the$500youspentfixingthe
transmissionisa(n)_____cost.
a. opportunity
b. fixed
c. incremental
d. sunk
e. relevant
Difficultylevel:
Easy
EROSION
b 17. Erosioncanbeexplainedasthe:
a. additionalincomegeneratedfromthesalesofanewlyaddedproduct.
b. lossofcurrentsalesduetoanewprojectbeingimplemented.
c. lossofrevenueduetoemployeetheft.
d. lossofrevenueduetocustomertheft.
e. lossofcashduetotheexpensesrequiredtofixaparkinglotafteraheavyrainstorm.
Difficultylevel:
Easy
EROSION
a 18. Whichofthefollowingareexamplesoferosion?
I. thelossofsalesduetoincreasedcompetitionintheproductmarket
II. thelossofsalesbecauseyourchiefcompetitorjustopenedastoreacrossthestreet
fromyourstore
III. thelossofsalesduetoanewproductwhichyourecentlyintroduced
IV. thelossofsalesduetoanewproductrecentlyintroducedbyyourcompetitor
a. IIIonly
b. IIIandIVonly
c. I,IIIandIVonly
d. IIandIVonly
e. I,II,III,andIV
Difficultylevel:
Medium
TYPESOFCOSTS
d 19. Whichofthefollowingshouldbeincludedintheanalysisofaproject?
I. sunkcosts
II. opportunitycosts
III. erosioncosts
IV. incrementalcosts
a. IandIIonly
b. IIIandIVonly
c. IIandIVonly
d. II,III,andIVonly
e. I,II,andIVonly
Difficultylevel:
Medium
NETWORKINGCAPITAL
d 20. Allofthefollowingareanticipatedeffectsofaproposedproject.Whichofthese shouldbeincludedintheinitialprojectcashflowrelatedtonetworkingcapital?
I. aninventorydecreaseof$5,000
II. anincreaseinaccountsreceivableof$1,500
III. anincreaseinfixedassetsof$7,600
IV. adecreaseinaccountspayableof$2,100
a. IandIIonly
b. IandIIIonly
c. IIandIVonly
d. I,II,andIVonly
e. I,II,III,andIV
Difficultylevel:
Medium
NETWORKINGCAPITAL
a 21. Changesinthenetworkingcapital:
a. canaffectthecashflowsofaprojecteveryyearoftheproject’slife.
b. onlyaffecttheinitialcashflowsofaproject.
c. areincludedinprojectanalysisonlyiftheyrepresentcashoutflows.
d. aregenerallyexcludedfromprojectanalysisduetotheirirrelevancetothetotal project.
e. affecttheinitialandthefinalcashflowsofaprojectbutnotthecashflowsofthe
middleyears.
Difficultylevel:
Medium
NETWORKINGCAPITAL
c 22. Whichoneofthefollowingwilldecreasenetworkingcapitalofafirm?
a. adecreaseinaccountspayable
b. anincreaseininventory
c. adecreaseinaccountsreceivable
d. anincreaseinthefirm’scheckingaccountbalance
e. adecreaseinfixedassets
Difficultylevel:
Easy
NETWORKINGCAPITAL
d 23. Networkingcapital:
a. canbeignoredinprojectanalysisbecauseanyexpenditureisnormallyrecoupedbythe
endoftheproject.
b. requirementsgenerally,butnotalways,createacashinflowatthebeginningofa
project.
c. expenditurescommonlyoccurattheendofaproject.
d. isfrequentlyaffectedbytheadditionalsalesgeneratedbyanewproject.
e. istheonlyexpenditurewhereatleastapartialrecoverycanbemadeattheendofa project.
Difficultylevel:
Easy
MACRS
d 24. AcompanywhichusestheMACRSsystemofdepreciation:
a. willhaveequaldepreciationcostseachyearofanasset’slife.
b. willexpensethecostofnonresidentialrealestateoveraperiodof7years.
c. candepreciatethecostofland,iftheysodesire.
d. willwriteofftheentirecostofanassetovertheasset’sclasslife.
e. cannotexpenseanyofthecostofanewassetduringthefirstyearoftheasset’slife.
Difficultylevel:
Easy
MACRS
a 25. Bet‘rBiltToysjustpurchasedsomeMACRS5-yearpropertyatacostof$230,000.
Whichofthefollowingwillcorrectlygiveyouthebookvalueofthisequipmentatthe
endofyear2?
MACRS5-yearpropert
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