BFIN 300 Final Exam Questions With
Solutions
When the expected future cash flows of an investment project increase, the net present value of
the project: increases
A PE is based on: historical earnings
The time value of money concept can be defined as: the relationship between a dollar to
be received in the future and a dollar today
Ratios that measure how efficiently a firm's management manages its current assets and current
liability accounts are known as _____ ratios. liquidity
Cash Flow to stockholders must be positive when: the dividends paid exceed the net new
equity raised
The ________ breaks down return on equity into three component parts: Du Point Identity
To convince investors to accept greater volatility, you must: increase the risk premium
, BFIN 300 Final Exam Questions With
Solutions
If a firm produces a twelve percent return on assets and a fifteen percent return on equity, then
the firm has a equity multiplier greater than 1.0
Incremental cash flows include any cost that: will change if a project is undertaken
The default risk premium is the: compensation investors demand for accepting credit risk
Using a payback period of three years for projects is: an arbitrary decision by
management
The cash flow tax savings generated as a result of a firm's tax-deductible depreciation expense is
called the: depreciation tax shield
One of the reasons why cash flow analysis is popular is because: it is difficult to
manipulate, or spin the cash flows.
Solutions
When the expected future cash flows of an investment project increase, the net present value of
the project: increases
A PE is based on: historical earnings
The time value of money concept can be defined as: the relationship between a dollar to
be received in the future and a dollar today
Ratios that measure how efficiently a firm's management manages its current assets and current
liability accounts are known as _____ ratios. liquidity
Cash Flow to stockholders must be positive when: the dividends paid exceed the net new
equity raised
The ________ breaks down return on equity into three component parts: Du Point Identity
To convince investors to accept greater volatility, you must: increase the risk premium
, BFIN 300 Final Exam Questions With
Solutions
If a firm produces a twelve percent return on assets and a fifteen percent return on equity, then
the firm has a equity multiplier greater than 1.0
Incremental cash flows include any cost that: will change if a project is undertaken
The default risk premium is the: compensation investors demand for accepting credit risk
Using a payback period of three years for projects is: an arbitrary decision by
management
The cash flow tax savings generated as a result of a firm's tax-deductible depreciation expense is
called the: depreciation tax shield
One of the reasons why cash flow analysis is popular is because: it is difficult to
manipulate, or spin the cash flows.
