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Experience:  Post Graduate Diploma in Management (MBA)
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1. (TCO 4) Which of the following is true regarding the evaluation

Resolved Question:

1. (TCO 4) Which of the following is true regarding the evaluation of projects? (Points : 4)
sunk costs should be included
erosion effects should not be considered
financing costs need to be included
opportunity costs are relevant


2. (TCO 4) There are several disadvantages to the payback method, among them: (Points : 4)
payback ignores the time value of money.
payback can be used in conjunction with time adjusted methods of evaluation.
payback is easy to use and to understand.
none of the above is a disadvantage.


3. (TCO 3 and 4) You can ensure that an investment is expected to create value for (Points : 4)
have a PI equal to zero.
produce negative rates of return.
have positive AARs.
have positive IRRs.
have positive NPVs.


4. (TCO 3 and 4) Portman's is considering adding a new product to its lineup. This product is expected to generate sales for three years, after which time the product will be discontinued. What is the project's net present value, if the firm wants to earn a 12 percent rate of return?


Year 0 1 2 3
Cash flow -$62,000 $10,730 $20,190 $40,340
(Points : 4)
$7,611.08
$6,795.61
$1,084.41
$4,862.07
$9,682.26


5. (TCO 4) The Inventive Co. is considering a new project. This project requires an initial cash investment of $70,000. The project will generate cash inflows of $10,500 in the first year. Then, the project will do nothing for two years, after which time cash inflows of $25,000 will be generated for four years. How long will it take the Inventive Co. to recover its $70,000 investment? (Points : 4)
5.16 years
5.38 years
6.11 years
6.62 years
6.94 years


6. (TCO 4) The postponement of a project until conditions are more favorable: (Points : 4)
is not a valuable option.
is referred to as the option to extend.
could cause a negative net present value project to become a positive net present value project.
will generally cause the internal rate of return for a project to decline.


7. (TCO 4) ____________, refers to the situation a firm faces when it has positive net present value projects, but cannot obtain financing for those projects. (Points : 4)
capital planning.
soft rationing.
capital rationing.
hard rationing.
a sunk cause.


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)
The net present value of the project is approximately $10,000
This project should be accepted because it has a positive net present value
This project’s payback period is 10 years or more
None of the above is true


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)
$12,000
$8,574
$19,800
None of the above


10. (TCO 1 and 4) Assume a corporation has earnings before depreciation, and taxes of $100,000, depreciation of $40,000, and that it has a 30 percent tax bracket. What are the after-tax cash flows for the company? (Points : 4)
$82,000
$110,000
$42,000
none of these


11. (TCO 8) Which of the following statements is true regarding systematic risk? (Points : 4)
is diversifiable
is the total risk associated with surprise events
it is not project or firm specific
it is measured by standard deviation


12. (TCO 8) Which statement is not true regarding risk? (Points : 4)
the expected return is usually not the same as the actual return
a key to assess risk is determining how much risk an investment adds to a portfolio
some risks can not be decreased or mitigated by the financial manager.
the higher the risk, the higher the return investors require for the investment
all of the above are true statements


13. (TCO 8) The stock of Uptown Men's Wear is expected to produce the following returns, given the various states of the economy. What is the expected return on this stock?
State of Economy Probability of State of Economy Rate of Return
Recession .20 -.10
Normal .75 .14
Boom .05 .22
(Points : 4)
9.6 percent
10.4 percent
12.8 percent
13.6 percent
15.3 percent


14. (TCO 8) You own a portfolio that consists of $8,000 in stock A, $4,600 in stock B, $13,000 in stock C, and $5,500 in stock D. What is the portfolio weight of stock A? (Points : 4)
14.79 percent
15.91 percent
18.42 percent
19.07 percent
25.72 percent
Submitted: 1 year ago.
Category: Homework
Expert:  Linda_us replied 1 year ago.

Hi Jay

Welcome and Thanks for asking your questions. I can help you with these. Please let me know your deadline.

Regards

Linda

Customer: replied 1 year ago.


Hi Linda


 


About 2 hours

Expert:  Linda_us replied 1 year ago.
Thanks for updated. I will post the solution in 1 hours.

For Question 9 "Using Tables 9.6 and 9.7 of your textbook (Page 277), which is the first year depreciation amount under MACRS?"

Please provide this table?
Customer: replied 1 year ago.

 


Table 9.6


 


CLASS EXAMPLES


 


3 YEAR EQUIPMENT USED IN RESEARCH


5 YEAR AUTOS, COMPUTERS


7 YEAR Most industrial equipment


 


Table 9.7


 


Year 3year 5 Year 7 Year


 


1 33.33% 20.00% 14.29%


2 44.45 32.00 24.49


3 14.81 19.20 17.49


4 7.41 11.52 12.49


5 11.52 8.93


6 5.76 8.92


7 8.93


8 4.46

Expert:  Linda_us replied 1 year ago.
Got it.

Just to update you done till 9.
Expert:  Linda_us replied 1 year ago.
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Linda_us, Finance, Accounts & Homework Tutor
Category: Homework
Satisfied Customers: 7013
Experience: Post Graduate Diploma in Management (MBA)
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