Updated 2024 WGU D362 Corporate
Finance Final Exam Review Questions and
Answers 100% Pass | Graded A+
David Mungai [Date] [Course title]
, Updated 2024 WGU D362 Corporate
Finance Final Exam Review Questions
and Answers 100% Pass | Graded A+
When evaluating potential projects, which of the following factors
should be incorporated as part of a projects estimated cash
flows? - Answer>> Any sunk costs that were incurred in the
past prior to considering the proposed project.
Any opportunity costs that are incurred if the project is
undertaken.
When evaluating a new project, the firm should consider all of the
following factors except: - Answer>> Previous expenditures
associated with a market test to determine the feasibility of the
project if the expenditures have been expensed for tax purposes.
The net cash flows attributable to an investment project which
represent the change in the firm's total cash flow that occurs as a
direct result of accepting the project are called: - Answer>>
incremental cash flows
A company is considering a new project. The companys CFO
plans to calculate the projects NPV by discounting the relevant
cash flows (which include the initial up-front costs, the operating
cash flows, and the terminal cash flows) at the companys cost of
capital (WACC). Which of the following factors should the CFO
include when estimating the relevant cash flows? - Answer>>
Any opportunity costs associated with the project.
A cash outlay that has already been incurred and that cannot be
recovered regardless of whether the project is accepted or
rejected is called: - Answer>> a sunk cost.
, ___________ occurs when the introduction of a new product
causes sales of existing products to decline. - Answer>>
Cannibalization
Suppose all assumptions of the Independence Hypothesis of
Capital Structure are true EXCEPT corporate interest payments
are tax deductible. What does this imply for debt versus equity
financing? - Answer>> Increasing the level of debt in the firm
will increase the value of the firm.
Bird-in-the-hand (Gordon and Lintner) says that the required
return on equity increases as the dividend payout ratio is
decreased. Their argument is based on the assumption that: -
Answer>> Investors view dividends as being less risky than
potential future capital gains.
You are evaluating a potential investment in equipment. The
equipment's basic price is $133,000, and shipping costs will be
$4,000. It will cost another $20,000 to modify it for special use by
your firm, and an additional $8,000 to install it. The equipment
falls in the MACRS 3-year class that allows depreciation of 33%
the first year, 45% the second year, 15% the third year, and 7%
the fourth year. You expect to sell the equipment for 24,800 at the
end of three years. The equipment is expected to generate
revenues of $127,000 per year with annual operating costs of
$58,000. The firm's marginal tax rate is 20.0%. What is the after-
tax operating cash flow for year 1? - Answer>> $66,090
You are evaluating a potential investment in equipment. The
equipment's basic price is $138,000, and shipping costs will be
$4,100. It will cost another $20,700 to modify it for special use by
your firm, and an additional $6,900 to install it. The equipment
falls in the MACRS 3-year class that allows depreciation of 33%
the first year, 45% the second year, 15% the third year, and 7%
the fourth year. You expect to sell the equipment for 22,100 at the
Finance Final Exam Review Questions and
Answers 100% Pass | Graded A+
David Mungai [Date] [Course title]
, Updated 2024 WGU D362 Corporate
Finance Final Exam Review Questions
and Answers 100% Pass | Graded A+
When evaluating potential projects, which of the following factors
should be incorporated as part of a projects estimated cash
flows? - Answer>> Any sunk costs that were incurred in the
past prior to considering the proposed project.
Any opportunity costs that are incurred if the project is
undertaken.
When evaluating a new project, the firm should consider all of the
following factors except: - Answer>> Previous expenditures
associated with a market test to determine the feasibility of the
project if the expenditures have been expensed for tax purposes.
The net cash flows attributable to an investment project which
represent the change in the firm's total cash flow that occurs as a
direct result of accepting the project are called: - Answer>>
incremental cash flows
A company is considering a new project. The companys CFO
plans to calculate the projects NPV by discounting the relevant
cash flows (which include the initial up-front costs, the operating
cash flows, and the terminal cash flows) at the companys cost of
capital (WACC). Which of the following factors should the CFO
include when estimating the relevant cash flows? - Answer>>
Any opportunity costs associated with the project.
A cash outlay that has already been incurred and that cannot be
recovered regardless of whether the project is accepted or
rejected is called: - Answer>> a sunk cost.
, ___________ occurs when the introduction of a new product
causes sales of existing products to decline. - Answer>>
Cannibalization
Suppose all assumptions of the Independence Hypothesis of
Capital Structure are true EXCEPT corporate interest payments
are tax deductible. What does this imply for debt versus equity
financing? - Answer>> Increasing the level of debt in the firm
will increase the value of the firm.
Bird-in-the-hand (Gordon and Lintner) says that the required
return on equity increases as the dividend payout ratio is
decreased. Their argument is based on the assumption that: -
Answer>> Investors view dividends as being less risky than
potential future capital gains.
You are evaluating a potential investment in equipment. The
equipment's basic price is $133,000, and shipping costs will be
$4,000. It will cost another $20,000 to modify it for special use by
your firm, and an additional $8,000 to install it. The equipment
falls in the MACRS 3-year class that allows depreciation of 33%
the first year, 45% the second year, 15% the third year, and 7%
the fourth year. You expect to sell the equipment for 24,800 at the
end of three years. The equipment is expected to generate
revenues of $127,000 per year with annual operating costs of
$58,000. The firm's marginal tax rate is 20.0%. What is the after-
tax operating cash flow for year 1? - Answer>> $66,090
You are evaluating a potential investment in equipment. The
equipment's basic price is $138,000, and shipping costs will be
$4,100. It will cost another $20,700 to modify it for special use by
your firm, and an additional $6,900 to install it. The equipment
falls in the MACRS 3-year class that allows depreciation of 33%
the first year, 45% the second year, 15% the third year, and 7%
the fourth year. You expect to sell the equipment for 22,100 at the
