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QUESTION:7[QUESTION BANK ID:269601]TYPE:MULTIPLE CHOICECORRECT
A company is considering a new project. The CFO plans to calculate the project’s NPV by estimating the relevant cash flows for each year of the project’s life (i.e., the initial investment cost, the annual operating cash flows, and the terminal cash flow), then discounting those cash flows at the company’s overall WACC. Which one of the following factors should the CFO be sure to include in the cash flows when estimating the relevant cash flows? << HIDE ANSWERSAAll sunk costs that have been incurred relating to the projectBAll interest expenses on debt used to help finance the projectCThe investment in working capital required to operate the project, even if that investment will be recoveredat the end of the project’s lifeDSunk costs that have been incurred relating to the project, but only if those costs were incurred prior to the current yearEEffects of the project on other divisions of the firm, but only if those effects lower the project’s own direct cash flowsQUESTION:8[QUESTION BANK ID:269455]TYPE:MULTIPLE CHOICEINCORRECTWhen taxes are considered, the value of a levered firm equals the value of the<< HIDE ANSWERSA
QUESTION:9[QUESTION BANK ID:269415]TYPE:MULTIPLE CHOICECORRECTWhich of the following statements is correct? << HIDE ANSWERSA
QUESTION:10[QUESTION BANK ID:269598]TYPE:MULTIPLE CHOICECORRECTTrenton Publishing follows a strict residual dividend policy. All else equal, which of the following factors would be most likely to lead to an increase in the firm’s dividend per share? << HIDE ANSWERS