cash flow estimation and risk analysis

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In capital budgeting, cost of capital is used as discount rate and is based on pre-determines

In capital budgeting, cost of capital is used as discount rate and is based on pre-determines
  • A. cost of inflation
  • B. cost of debt and equity
  • C. cost of opportunity
  • D. cost of transaction
  • Correct Answer: Option B

Cash flows that should be considered for decision in hand are classified as

Cash flows that should be considered for decision in hand are classified as
  • A. relevant cash flows
  • B. irrelevant cash flows
  • C. marginal cash flows
  • D. transaction cash flows
  • Correct Answer: Option A

In cash flow estimation, depreciation shelters company’s income from

In cash flow estimation, depreciation shelters company’s income from
  • A. expansion
  • B. salvages
  • C. taxation
  • D. discounts
  • Correct Answer: Option C

Free cash flow is $17000 and net investment in operating capital is $10000 then net operating profit after taxes would be

Free cash flow is $17000 and net investment in operating capital is $10000 then net operating profit after taxes would be
  • A. $7,000
  • B. $27,000
  • C. −$27000
  • D. −$7000
  • Correct Answer: Option B

Net investment in operating capital is subtracted from net operating profit after taxes to calculate

Net investment in operating capital is subtracted from net operating profit after taxes to calculate
  • A. relevant inflows
  • B. free cash flow
  • C. relevant outflows
  • D. cash outlay
  • Correct Answer: Option B

Double declining balance method and sum of years digits are included in

Double declining balance method and sum of years digits are included in
  • A. yearly method
  • B. single methods
  • C. double methods
  • D. accelerated methods
  • Correct Answer: Option D

Required increasing in current assets and an increasing in current liabilities is subtracted to calculate

Required increasing in current assets and an increasing in current liabilities is subtracted to calculate
  • A. change in net working capital
  • B. change in current assets
  • C. change in current liabilities
  • D. change in depreciation
  • Correct Answer: Option A

Relevant cash flow which company expects when its will implement project is classified as

Relevant cash flow which company expects when its will implement project is classified as
  • A. irrelevant cash flow
  • B. relevant cash flow
  • C. incremental cash flow
  • D. decrease cash flow
  • Correct Answer: Option C

In cash flow estimation, depreciation is considered as

In cash flow estimation, depreciation is considered as
  • A. cash charge
  • B. noncash charge
  • C. cash flow discounts
  • D. net salvage discount
  • Correct Answer: Option B

Gross fixed asset expenditures is $6000 and free cash flow is $8000 then operating cash flows will be

Gross fixed asset expenditures is $6000 and free cash flow is $8000 then operating cash flows will be
  • A. −$14000
  • B. $2,000
  • C. $14,000
  • D. −$2000
  • Correct Answer: Option B

Cost which has occurred already and not affected by decisions is classified as

Cost which has occurred already and not affected by decisions is classified as
  • A. sunk cost
  • B. occurred cost
  • C. weighted cost
  • D. mean cost
  • Correct Answer: Option A