Answer Choices:
a. True
b. False
Answer: b. False
Question: A firm that bases its capital budgeting decisions on either NPV or IRR will be more likely to accept a given project if it uses accelerated depreciation than if it uses straight-line depreciation, other things being equal.
Answer Choices:
a. True
b. False
Answer: a. True
Question: Typically, a project will have a higher NPV if the firm uses accelerated rather than straight-line depreciation. This is because the total cash flows over the project’s life will be higher if accelerated depreciation is used, other things held constant.
Answer Choices:
a. True
b. False
Answer: b. False
Question: Extending the lives of projects with different lives out to a common life for comparison purposes, while theoretically appealing, is valid only if there is a reasonably high probability that the projects will actually be repeated beyond their initial lives.
Answer Choices:
a. True
b. False
Answer: a. True
Question: The relative risk of a proposed project is best accounted for by which of the following procedures?
Answer Choices:
a. Adjusting the discount rate upward if the project is judged to have above-average risk.
b. Adjusting the discount rate upward if the project is judged to have below-average risk.
c. Reducing the NPV by 10% for risky projects.
d. Picking a risk factor equal to the average discount rate.
e. Ignoring risk because project risk cannot be measured accurately.
Answer: a. Adjusting the discount rate upward if the project is judged to have above-average risk.
Question: Which of the following is NOT a relevant cash flow and thus should NOT be reflected in the analysis of a capital budgeting project?
Answer Choices:
a. Changes in net operating working capital.
b. Shipping and installation costs for machinery acquired.
c. Cannibalization effects.
d. Opportunity costs.
e. Sunk costs that have been expensed for tax purposes.
Answer: e. Sunk costs that have been expensed for tax purposes.
Question: Superior analytical techniques, such as NPV, used in combination with risk-adjusted cost of capital estimates, can overcome the problem of poor cash flow estimation and lead to generally correct accept/reject decisions for capital budgeting projects.
Answer Choices:
a. True
b. False
Answer: b. False
Question: It is extremely difficult to estimate the revenues and costs associated with large, complex projects that take several years to develop. This is why subjective judgment is often used for such projects along with discounted cash flow analysis.
Answer Choices:
a. True
b. False
Answer: a. True
Question: People living in poverty are likely to be children and live with one adult, whom is a man.
Answer Choices:
True
False
Answer: False
Question: We can identify the cash costs and cash inflows to a company that will result from a project. These could be called “direct inflows and outflows,” and the net difference is the direct net cash flow. If there are other costs and benefits that do not flow from or to the firm, but to other parties, these are called externalities, and they need not be considered as a part of the capital budgeting analysis.
Answer Choices:
a. True
b. False
Answer: b. False
Question: Opportunity costs include those cash inflows that could be generated from assets the firm already owns if those assets are not used for the project being evaluated.
Answer Choices:
a. True
b. False
Answer: a. True
Question: The primary advantage to using accelerated rather than straight-line depreciation is that with accelerated depreciation the present value of the tax savings provided by depreciation will be higher, other things held constant.
Answer Choices:
a. True
b. False
Answer: a. True
Question: Real options exist whenever managers have the opportunity, after a project has been implemented, to make operating changes in response to changed conditions that modify the project’s cash flows.
Answer Choices:
a. True
b. False
Answer: a. True
Question: Suppose Tapley Inc. uses a WACC of 8% for below-average risk projects, 10% for average-risk projects, and 12% for above-average risk projects. Which of the following independent projects should Tapley accept, assuming that the company uses the NPV method when choosing projects?
Answer Choices:
a. Project A, which has average risk and an IRR = 9%.
b. Project B, which has below-average risk and an IRR = 8.5%.
c. Project C, which has above-average risk and an IRR = 11%.
d. Without information about the projects’ NPVs we cannot determine which one or ones should be accepted.
e. All of these projects should be accepted as they will produce a positive NPV.
Answer: b. Project B, which has below-average risk and an IRR = 8.5%.
Question: The primary advantage to using accelerated rather than straight-line depreciation is that with accelerated depreciation the total amount of depreciation that can be taken, assuming the asset is used for its full tax life, is greater.
Answer Choices:
a. True
b. False
Answer: b. False
Question: Accelerated depreciation has an advantage for profitable firms in that it moves some cash flows forward, thus increasing their present value. On the other hand, using accelerated depreciation generally lowers the reported current year’s profits because of the higher depreciation expenses. However, the reported profits problem can be solved by using different depreciation methods for tax and stockholder reporting purposes.
Answer Choices:
a. True
b. False
Answer: a. True
Question: Ambulatory care includes outpatient services, education, counseling, and community outreach.
Answer Choices:
True
False
Answer: True
Question: The clear advantage of an ANOVA over a t-test is that:
Answer Choices:
ANOVA can have a null effect
ANOVA can compare more than 2 groups at the same time
All of the provided answers are true
ANOVA works with variances
Answer: All of the provided answers are true
Question: Absolute Poverty puts a clear value that is firmly set; anyone who earns less than that amount is officially poor.
Answer Choices:
True
False
Answer: True
Question: If a firm’s projects differ in risk, then one way of handling this problem is to evaluate each project with the appropriate risk-adjusted discount rate.
Answer Choices:
a. True
b. False
Answer: a. True
Question: Discharge planning is not a critical role of social workers in acute care settings.
Answer Choices:
True
False
Answer: False
Question: One of the ways HMOs reduce costs is by limiting tests.
Answer Choices:
True
False
Answer: True
Question: The option to abandon a project is a real option, but a call option on a stock is not a real option.
Answer Choices:
a. True
b. False
Answer: a. True