Question

Which of the following occurs when a new project increases the sales and therefore the cash flows of an existing product?

Erosion |
||

Sunk Costs |
||

Opportunity Costs |
||

Synergy |

Which of the following method must be preferred if the number changes in the signs of future cash flows within the project’s economic life is more than one?

IRR |
||

Payback Period |
||

Discounted Payback Period |
||

NPV |

Which of the following does the estimation of the cash flows of a project depend on?

Revenues |
||

Variable Costs |
||

Fixed Costs |
||

All |

Answer #1

1.Synergy means when there is a combination of two factors to increase the overall value of the firm by increasing the cash flows and increasing the other benefits.

When a new project increases the sales and therefore increases the sales and also increases the cash flows of an existing product it would be termed as synergy.

It cannot be said that erosion and sunk cost or opportunity cost, are not the correct answer.

Correct answer would be option ( d) synergy.

You are considering a project with an initial cash outlay of
$100,000 and expected free cash flows of $23,000 at the end of each
year for 6 years. The required rate of return for this project is
10 percent.
a. What is the project’s payback period?
b. What is the project’s discounted payback period?
c. What is the project’s NPV ?
d. What is the project’s PI ?
e. What is the project’s IRR ?
f. What is the project’s...

Suppose Extensive Enterprises’s CFO is evaluating a project with
the following cash inflows. She does not know the project’s initial
cost; however, she does know that the project’s regular payback
period is 2.5 years.
Year
Cash Flow
Year 1
$275,000
Year 2
$450,000
Year 3
$500,000
Year 4
$400,000
If the project’s weighted average cost of capital (WACC) is 9%,
what is its NPV?
A. $260,409
B. $390,613
C. $325,511
D. $309,235
Which of the following statements indicate a disadvantage...

This is the term that describes when the cash
flows of a new project come at the expense of
a firm’s existing projects.
a.
cannibalism
b.
erosion
c.
miscalculation
d.
opportunity costs

Suppose Acme Manufacturing Corporation’s CFO is evaluating a
project with the following cash inflows. She does not know the
project’s initial cost; however, she does know that the project’s
regular payback period is 2.5 years.
Year
Cash Flow
Year 1
$350,000
Year 2
$425,000
Year 3
$475,000
Year 4
$425,000
If the project’s weighted average cost of capital (WACC) is 7%,
what is its NPV?
$397,786
$437,565
$417,675
$457,454
Which of the following statements indicate a disadvantage of
using the...

Suppose Acme Manufacturing Corporation’s CFO is evaluating a
project with the following cash inflows. She does not know the
project’s initial cost; however, she does know that the project’s
regular payback period is 2.5 years.
Year
Cash Flow
1
$325,000
2
$475,000
3
$500,000
4
$475,000
1. If the project’s weighted average cost of capital (WACC) is
9%, what is its NPV?
$314,973
$426,141
$389,085
$370,557
2. Which of the following statements indicate a disadvantage of
using the discounted payback...

You are considering a project with conventional cash flows and
the following characteristics:
Discounted Payback
2.95 Years
NPV
$510,000
IRR
12%
Which of the following statements is correct given this
information?
I.
The discount rate used in computing the net present value was
greater than 12%.
II.
The payback period must be greater than 2.95 years.
III.
This project should be accepted as the NPV is positive.

1. Multiple internal rates or return occur when:
Select one:
A. The project’s cash flows are larger earlier in the life of
the project.
B. The project’s cash flows are larger later in the life of the
project.
C. When the project’s cash flows experience normal cash flow
streams (i.e. one sign change).
D. When the project’s cash flows experience non-normal cash flow
streams (i.e. two or more sign changes).
E. When the IRR is equal to the WACC.
2....

ABC Corporation is considering a project that provides the
following cash flows steam:
Year
0
1
2
3
4
5
Cash flows
-$1,000
$375
$425
$250
$110
$100
If WACC is 10%, what is NPV and should the company accept the
project?
Find IRR, MIRR, payback, and discounted payback period.
Considering the following projects.
Project
Year
0
1
2
3
4
A
Cash flows
-$100
$35
$35
$35
$35
B
Cash flows
-$100
$60
$50
$40
$30
Project A has...

ABC Corporation is considering a project that provides the
following cash flows steam:
Year
0
1
2
3
4
5
Cash flows
-$1,000
$375
$425
$250
$110
$100
If WACC is 10%, what is NPV, and
should the company accept the project?
Find IRR, MIRR,
payback, and discounted payback
period.

Telesis Corp is considering a project that has the
following cash flows:
Year
Cash Flow
0
-$1,000
1
400
2
300
3
500
4
400
The company’s weighted average cost of capital (WACC) is
10%. What are the project’s payback period (Payback), internal rate
of return (IRR), net present value (NPV), and profitability index
(PI)?
A.
Payback = 3.5, IRR = 10.22%, NPV = $1260, PI=1.26
B.
Payback = 2.6, IRR = 21.22%, NPV = $349, PI=1.35
C.
Payback =...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 7 minutes ago

asked 22 minutes ago

asked 24 minutes ago

asked 26 minutes ago

asked 34 minutes ago

asked 48 minutes ago

asked 53 minutes ago

asked 58 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago