ch13 - FIN 301-01 Final Examination Dr Dorla Evans Spring...

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FIN 301-01 Final Examination Dr. Dorla Evans Spring 2010 Read the following questions and mark the best answer on the computer sheet. Do not read more into the question than is presented. If in doubt, ask me. 1. Forecasting risk is defined as the possibility that: a. some proposed projects will be rejected. b. some proposed projects will be temporarily delayed. c. incorrect decisions will be made due to erroneous cash flow projections. d. some projects will be mutually exclusive. e. tax rates could change over the life of a project. 2. If you see a “worst case scenario” for a project, the analyst is likely using a. scenario analysis b. sensitivity analysis c. base-case analysis d. simulation analysis e. multiple-outcome analysis 3. An analysis of the change in a project's NPV when a single variable is changed is called _____ analysis. a. forecasting b. scenario c. sensitivity d. simulation e. break-even 4. Variable costs can be defined as the costs that: a. remain constant for all time periods. b. remain constant over the short run. c. vary directly with sales. d. are classified as non-cash expenses. e. are inversely related to the number of units sold. 5. By definition, which one of the following must equal zero at the accounting break-even point? a. net present value b. internal rate of return c. contribution margin d. net income e. operating cash flow 6. If the economy is normal, Charleston Freight stock is expected to return 15.7 percent. If the economy falls into a recession, the stock's return is projected at a negative 11.6 percent. The probability of a normal economy is 80 percent while the probability of a recession is 20 percent. What is the variance of the returns on this stock? a. 0.010346 b. 0.011925 c. 0.013420 d. 0.013927 e. 0.014315 7. Which is not true about the financial breakeven point? a. It is the point at which net income is zero. b. It is the point where the PV of the inflows equals the PV of the outflows. c. It is the point at which the NPV is zero. d. It can tell us how bad sales could get before the project loses money.
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8. Precise Machinery is analyzing a proposed project. The company expects to sell 2,100 units, give or take 5 percent. The sales price is estimated at $750 per unit, plus or minus 2 percent. What is the sales revenue under the worst case scenario? a. $1,686,825 b. $1,496,250 c. $1,466,325 d. $1,543,500 e. $1,620,675 9. Wexford Industrial Supply is considering a new project with estimated depreciation of $26,000, fixed costs of $79,000, and a sales price of $26.91 per unit. The variable costs per unit are estimated at $11.80. What is the accounting break- even level of production? a. 4,871 units b. 5,333 units c. 5,415 units d. 6,949 units e. 7,248 units 10. An efficient capital market is one in which: a. brokerage commissions are zero. b. taxes are irrelevant.
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This note was uploaded on 10/13/2011 for the course MGT 101 taught by Professor Karen during the Spring '11 term at Missouri State University-Springfield.

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ch13 - FIN 301-01 Final Examination Dr Dorla Evans Spring...

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