Homework Answers
21]
Free cash flow is the correct answer. When measuring the total amount of available cash flow from a project, free cash flow is the correct measure because it takes into account after-tax cash flows, non-cash expenses, changes in working capital and capital expenditures.
Operating cash flow is not correct. It does not take into account changes in working capital and capital expenditures.
Investment in operating capital is not correct. It is only one component of total cash flow.
Sunk cash flow is not correct. Sunk cash flows should not be considered in project cash flows because they are incurred in the past, and are not incremental to the acceptance of the project
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Question 21 (Mandatory) (1 point) Which of these is used as a measure of the total...
dont understand, please help! Thank you! Question 25 (Mandatory) (1 point) One way to account for...
dont understand, please help! Thank you!
Question 25 (Mandatory) (1 point) One way to account for flotation costs of raising capital is to: 0 adjust the project's initial cash flow so that it will reflect the flotation costs. 0 adjust all the project's cash flows so that each year it will reflect the flotation costs. 0 adjust only the project's operating cash flows to account for paying back the shareholders. 0 adjust the project's tax burden to account for the...
Question 7 (Mandatory) (1 point) When firms use multiple sources of capital, they need to calculate...
Question 7 (Mandatory) (1 point) When firms use multiple sources of capital, they need to calculate the appropriate discount rate for valuing their firm's cash flows as: O a weighted average of the capital components costs. O they apply to each asset as they are purchased with their respective forms of debt or equity. O a sum of the capital components costs. O a simple average of the capital components costs. Question 8 (Mandatory) (1 point) Which of the following...
Question 27 1 pts Which of the following statements regarding depreciation is incorrect? When filing for...
Question 27 1 pts Which of the following statements regarding depreciation is incorrect? When filing for corporate taxes, companies prefer to use the depreciation method that allows them to deduct equal amount of depreciation each period. Under the accelerated method, the IRS allows an asset to be fully depreciated to a zero book value. O When selling a partially depreciated asset, a firm is only responsible for taxes on the sale price minus the un-depreciated book value O The straight...
Question 10 (Mandatory) (1 point) Which of the following statements is true? If the new project...
Question 10 (Mandatory) (1 point) Which of the following statements is true? If the new project is riskier than the firm's existing projects, then it should be charged a higher cost of capital. O If the new project is riskier than the firm's existing projects, then it should be charged a lower cost of capital. If the new project is riskier than the firm's existing projects, then it should be charged the firm's cost of capital. The new project's risk...
1. When determining relevant cash flows for project evaluation, we should _____. a. discount interest expenses...
1. When determining relevant cash flows for project evaluation, we should _____. a. discount interest expenses to the present b. subtract interest expenses from EBIT c. ignore interest expenses d. add back in interest expenses after subracting taxes 2. When calculating incremental cash flows, we should exclude _____. a. side effects b. taxes c. opportunity costs d. sunk costs 3. When calculating incremental cash flows, we should include _____. a. interest b. sunk costs c. financing expenses d. opportunity costs...
D l Question 1 When calculating incremental cash flows, we should include O interest O financing...
D l Question 1 When calculating incremental cash flows, we should include O interest O financing expenses Q sunk costs opportunity costs | Question 2 2 pts The cash flows that occur just because of a new project are called O marginal cash flows o project cash flos e additional cash flows O incremental cash flows 2 pts D | Question 3 Sun Corp. uses a discount rate of 6% for below-average risk projects, 8% for average-risk projects, and 10%...
Question 4 1 point Number Help Fairfax Pizza is evaluating a project that would require an...
Question 4 1 point Number Help Fairfax Pizza is evaluating a project that would require an initial investment in equipment of 400,000 dollars and that is expected to last for 9 years. MACRS depreciation would be used where the depreciation rates in years 1, 2, 3, and 4 are 38 percent, 34 percent, 19 percent, and 9 percent, respectively. For each year of the project, Fairfax Pizza expects relevant, incremental annual revenue associated with the project to be 456,000 dollars...
Question 83 (Mandatory) (1 point) Which term refers to the rate of unemployment that occurs when...
Question 83 (Mandatory) (1 point) Which term refers to the rate of unemployment that occurs when the economy is producing its potential GDP? a) the natural rate of unemployment b) cyclical unemployment c) structural unemployment d) the normal rate of unemployment Question 84 (Mandatory) (1 point) Exhibit 14-3 Price level Potential output LRAS SRAS AD Real GDP Refer to the graph in the exhibit. In this situation, how could the Bank of Canada return the economy to potential output? a)...
Bonus homework for class Please show Formulas! thanks in advance! 1. Calculating OCF [LO1] Consider the...
Bonus homework for class Please show Formulas! thanks in advance! 1. Calculating OCF [LO1] Consider the following income statement: Sales $713,500 Cost 497,300 EBIT ? Taxes (34%) ? Net Income ? Fill in the missing numbers and then calculate the OCF. What is the depreciation tax shield? 2. Operating Cash Flow and Leverage [LO41 A proposed project has fixed costs of $83,000 per year. The operating cash flow at 9,100 units is $102,900. Ignoring the effect of taxes, what is...
Question 49 (Mandatory) (1 point) Operating cycle is measured as: 0 0 days' sales in inventory...
Question 49 (Mandatory) (1 point) Operating cycle is measured as: 0 0 days' sales in inventory plus average collection period. od days' sales in inventory minus average collection period. ** 0 inventory turns plus average collection period. 0 inventory turns minus average collection period. Question 53 (Mandatory) (1 point) Which of these is the period of time after a check has been written, but not yet cleared and deposited? Float Overnight securities O Safety stock Liquid current assets Question 57...
dont understand, please help! Thank you!
Question 25 (Mandatory) (1 point) One way to account for flotation costs of raising capital is to: 0 adjust the project's initial cash flow so that it will reflect the flotation costs. 0 adjust all the project's cash flows so that each year it will reflect the flotation costs. 0 adjust only the project's operating cash flows to account for paying back the shareholders. 0 adjust the project's tax burden to account for the...
Question 7 (Mandatory) (1 point) When firms use multiple sources of capital, they need to calculate the appropriate discount rate for valuing their firm's cash flows as: O a weighted average of the capital components costs. O they apply to each asset as they are purchased with their respective forms of debt or equity. O a sum of the capital components costs. O a simple average of the capital components costs. Question 8 (Mandatory) (1 point) Which of the following...
Question 27 1 pts Which of the following statements regarding depreciation is incorrect? When filing for corporate taxes, companies prefer to use the depreciation method that allows them to deduct equal amount of depreciation each period. Under the accelerated method, the IRS allows an asset to be fully depreciated to a zero book value. O When selling a partially depreciated asset, a firm is only responsible for taxes on the sale price minus the un-depreciated book value O The straight...
Question 10 (Mandatory) (1 point) Which of the following statements is true? If the new project is riskier than the firm's existing projects, then it should be charged a higher cost of capital. O If the new project is riskier than the firm's existing projects, then it should be charged a lower cost of capital. If the new project is riskier than the firm's existing projects, then it should be charged the firm's cost of capital. The new project's risk...
D l Question 1 When calculating incremental cash flows, we should include O interest O financing expenses Q sunk costs opportunity costs | Question 2 2 pts The cash flows that occur just because of a new project are called O marginal cash flows o project cash flos e additional cash flows O incremental cash flows 2 pts D | Question 3 Sun Corp. uses a discount rate of 6% for below-average risk projects, 8% for average-risk projects, and 10%...
Question 4 1 point Number Help Fairfax Pizza is evaluating a project that would require an initial investment in equipment of 400,000 dollars and that is expected to last for 9 years. MACRS depreciation would be used where the depreciation rates in years 1, 2, 3, and 4 are 38 percent, 34 percent, 19 percent, and 9 percent, respectively. For each year of the project, Fairfax Pizza expects relevant, incremental annual revenue associated with the project to be 456,000 dollars...
Question 83 (Mandatory) (1 point) Which term refers to the rate of unemployment that occurs when the economy is producing its potential GDP? a) the natural rate of unemployment b) cyclical unemployment c) structural unemployment d) the normal rate of unemployment Question 84 (Mandatory) (1 point) Exhibit 14-3 Price level Potential output LRAS SRAS AD Real GDP Refer to the graph in the exhibit. In this situation, how could the Bank of Canada return the economy to potential output? a)...
Question 49 (Mandatory) (1 point) Operating cycle is measured as: 0 0 days' sales in inventory plus average collection period. od days' sales in inventory minus average collection period. ** 0 inventory turns plus average collection period. 0 inventory turns minus average collection period. Question 53 (Mandatory) (1 point) Which of these is the period of time after a check has been written, but not yet cleared and deposited? Float Overnight securities O Safety stock Liquid current assets Question 57...
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