1. In essence, capital budgeting is the process of:
a. Deciding what to do with the firm’s money
b. Deciding how much capital the firm needs
c. Deciding where to get the money for capital investment projects
d. Deciding when to invest in a new project
2. Which of the following cash flows is an “incremental cash flow” for the purposes of capital budgeting?
a. Expenditures on plant and equipment for a new project
b. R& D expenditures for a new project during the last three years
c. Dividend payments
d. Reduction of a competitor’s sales as a result of the your company’s introduction of a new product
3. In capital budgeting, the payback period is the:
a. Amount of time it takes to receive all the future cash flows from a project
b. Amount of time it takes to pay back any money borrowed to finance the project
c. Amount of time it take for the project to be completed
d. Amount if time it takes to recoup the initial investment for the project
4. The Seattle Corporation has been presented with an investment opportunity which will yield cash flows of $30,000 per year in Years 1 through 4, $35,000 per year in Years 5 through 9, and $40,000 in Year 10. This investment will cost the firm $150,000 today, and the firm’s cost of capital is 10 percent. At what point will the initial investment be paid back?
a. at the end of the 4th year
b. at the end of the 5th year
c. at the end of the 6th year
d. at the end of the 7th year
5. Consider the following income statement and answer the question that follows:
Sales (100 units)…………..$200
Variable costs ($.20 ea)……20
What is the firm’s Breakeven Point in units?
6. The net present value of an investment is its present value minus its future value.
7. If the NPV of a proposed project is positive, the NPV amount represents:
a. The amount of profit the firm will make if it adopts the project
b. The amount of cash that the project will produce if adopted
c. The amount of value that will be added to the firm if the project is adopted
d. The project’s expected rate of return
8. Joe the cut-rate bond dealer has offered to sell you a ten year zero-coupon bond for $300. (Remember, zero-coupon bonds pay their owners $1,000 at maturity and involve no other cash flows other than the purchase price.) If your required rate of return for cut-rate bonds is 20%, what is the NPV of Joe’s deal?
a. about $161
b. about -$138
c. about $700
d. about -$200
e. about $1096
9. When using the IRR method to evaluate investments, those with positive IRRs are accepted and those with negative IRRs are rejected.
10. You’ve decided to give up playing the stock market and buy some zero-coupon bonds from Joe the cut-rate bond dealer instead. (Remember, zero-coupon bonds because they pay off a known amount, $1,000, at maturity and involve no other cash flows other than the purchase price.) Assume your required rate of return is 12%. If you buy some 10-year zero coupon bonds for $400 each today will the bonds meet your return requirements?
c. It depends
Why Work with Us
Top Quality and Well-Researched Papers
We always make sure that writers follow all your instructions precisely. You can choose your academic level: high school, college/university or professional, and we will assign a writer who has a respective degree.
Professional and Experienced Academic Writers
We have a team of professional writers with experience in academic and business writing. Many are native speakers and able to perform any task for which you need help.
Free Unlimited Revisions
If you think we missed something, send your order for a free revision. You have 10 days to submit the order for review after you have received the final document. You can do this yourself after logging into your personal account or by contacting our support.
Prompt Delivery and 100% Money-Back-Guarantee
All papers are always delivered on time. In case we need more time to master your paper, we may contact you regarding the deadline extension. In case you cannot provide us with more time, a 100% refund is guaranteed.
Original & Confidential
We use several writing tools checks to ensure that all documents you receive are free from plagiarism. Our editors carefully review all quotations in the text. We also promise maximum confidentiality in all of our services.
24/7 Customer Support
Our support agents are available 24 hours a day 7 days a week and committed to providing you with the best customer experience. Get in touch whenever you need any assistance.
Try it now!
How it works?
Follow these simple steps to get your paper done
Place your order
Fill in the order form and provide all details of your assignment.
Proceed with the payment
Choose the payment system that suits you most.
Receive the final file
Once your paper is ready, we will email it to you.
No need to work on your paper at night. Sleep tight, we will cover your back. We offer all kinds of writing services.
No matter what kind of academic paper you need and how urgent you need it, you are welcome to choose your academic level and the type of your paper at an affordable price. We take care of all your paper needs and give a 24/7 customer care support system.
Admission Essays & Business Writing Help
An admission essay is an essay or other written statement by a candidate, often a potential student enrolling in a college, university, or graduate school. You can be rest assurred that through our service we will write the best admission essay for you.
Our academic writers and editors make the necessary changes to your paper so that it is polished. We also format your document by correctly quoting the sources and creating reference lists in the formats APA, Harvard, MLA, Chicago / Turabian.
If you think your paper could be improved, you can request a review. In this case, your paper will be checked by the writer or assigned to an editor. You can use this option as many times as you see fit. This is free because we want you to be completely satisfied with the service offered.