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BFIN 300 - FINAL EXAM 2024 Exam Questions With Solutions $18.49   Add to cart

Exam (elaborations)

BFIN 300 - FINAL EXAM 2024 Exam Questions With Solutions

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  • BFIN300

BFIN 300 - FINAL EXAM 2024 Exam Questions With Solutions What is payback period rule? The length of time it takes for a project to return to its initial investment Based on the payback period rule, when is a project acceptable? If its calculated payback is less than the prespecificed number...

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  • October 13, 2024
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  • 2024/2025
  • Exam (elaborations)
  • Questions & answers
  • BFIN300
  • BFIN300
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UpperClass
BFIN 300 - FINAL EXAM 2024 Exam
Questions With Solutions

What is payback period rule? The length of time it takes for a project to return to its initial

investment




Based on the payback period rule, when is a project acceptable? If its calculated payback

is less than the prespecificed number ex; two years




What is discounted payback period rule? The length of time its takes for a project's

discounted cash flows to equal its initial investment




True or False; As long as the cash flows & discount rate are positive, the discounted payback

period will never be smaller than the payback period True, because the discounting

reduces the value of the cash flow




What is the best alternative to the NPV method? Internal rate of return (IRR)




What is Internal rate of return (IRR)? - The discount rate at which the net present value of

an investment is zero. It is a method of evaluation capital

, BFIN 300 - FINAL EXAM 2024 Exam
Questions With Solutions
- expenditure proposals

The interest rate that causes the NPV of the project to be zero




What is the general rule for using the IRR? Accept the project if the IRR is greater than

the discount rate. Reject the project if the IRR is less than the discount rate.




What is profitability index? The ratio of the present value of the future expected cash

flows after initial investment divided by the initial investment




What are relevant cash flows? - The cash inflows and outflows directly associated with a

particular decision or project

- A change in the firm's future cash flow that comes about a direct effect of the decision to that

that project




What are incremental cash flows? The difference between the cash flows of a firm with a

project and the cash flows of a firm without a project




In calculating the NPV of a project, what cash flows should be used? Incremental cash

flows

, BFIN 300 - FINAL EXAM 2024 Exam
Questions With Solutions

What does standalone basis mean? Analyzing a project without considering its

interactions with other activities or entities




What is a sunk cost? A cost that has already occurred and cannot be reversed, such costs

should be ignored when deciding whether to accept or reject a project




Why should sunk costs be ignored? They cannot be changed by a decision to accept or

reject a project




Are sunk costs incremental cash flows? No




What is an opportunity cost? -By taking a project a firm is foregoing other opportunities

for using the assets

- The most valuable alternative that is given up. The discount rate used in NPV computation is an

opportunity interest rate




Is an opportunity cost an incremental cash flow? No

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