Practical Financial Management 8th Edition By William R. Lasher – Test Bank

1. Which of the following is not considered a relevant factor in estimating the incremental cash flows of a proposed capital project?
a. Pre-startup expenditures
b. Financing costs
c. Incremental working capital requirements
d. Taxes on incremental expenses and earnings
ANSWER: b
POINTS: 1
DIFFICULTY: Easy
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: FINA.LASH.17.11.02 – Project Cash Flows
NATIONAL STANDARDS: BUSPROG: Analytic – BUSPROG: Analytic skills: Statistics and Management Science
TOPICS: Project Cash Flows—A Few Specific Issues
KEYWORDS: Bloom’s: Knowledge
DATE CREATED: 5/26/2015 9:01 AM
DATE MODIFIED: 7/21/2015 5:43 PM

2. Which of the following is not a cash flow consideration in evaluating capital budgeting projects?
a. Income taxes on incremental earnings
b. Identifiable incremental overhead
c. Incremental accounting profit (net income)
d. Depreciation
ANSWER: c
POINTS: 1
DIFFICULTY: Easy
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: FINA.LASH.17.11.01 – Cash Flow Estimation
NATIONAL STANDARDS: BUSPROG: Analytic – BUSPROG: Analytic skills: Statistics and Management Science
TOPICS: Project Cash Flows—A Few Specific Issues
KEYWORDS: Bloom’s: Knowledge
DATE CREATED: 5/26/2015 9:01 AM
DATE MODIFIED: 7/21/2015 5:44 PM

3. Which of the following is a cash flow consideration in evaluating a proposed capital project?
a. Incremental overhead effect
b. Basic overheads
c. Financing costs
d. All of the above
ANSWER: a
POINTS: 1
DIFFICULTY: Easy
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: FINA.LASH.17.11.01 – Cash Flow Estimation
NATIONAL STANDARDS: BUSPROG: Analytic – BUSPROG: Analytic skills: Statistics and Management Science
TOPICS: Project Cash Flows—A Few Specific Issues
KEYWORDS: Bloom’s: Knowledge
DATE CREATED: 5/26/2015 9:01 AM
DATE MODIFIED: 7/21/2015 5:45 PM

4. Which of the following is not a cash flow consideration in evaluating a proposed capital project?
a. Increases in net working capital
b. Basic overhead expenses
c. Sales lost from other parts of the company because of the project
d. Foregone depreciation resulting from a replacement machine
ANSWER: b
POINTS: 1
DIFFICULTY: Easy
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: FINA.LASH.17.11.01 – Cash Flow Estimation
NATIONAL STANDARDS: BUSPROG: Analytic – BUSPROG: Analytic skills: Statistics and Management Science
TOPICS: Project Cash Flows—A Few Specific Issues
KEYWORDS: Bloom’s: Knowledge
DATE CREATED: 5/26/2015 9:01 AM
DATE MODIFIED: 7/21/2015 5:46 PM

5. When estimating cash flows for capital budgeting projects:
a. interest expenses incurred to finance the project are included.
b. interest expense is considered in the cash flow estimates only if the financing is principally from debt.
c. interest expense is never included in the cash flow estimates.
d. None of the above
ANSWER: c
POINTS: 1
DIFFICULTY: Easy
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: FINA.LASH.17.11.01 – Cash Flow Estimation
NATIONAL STANDARDS: BUSPROG: Analytic – BUSPROG: Analytic skills: Statistics and Management Science
TOPICS: Project Cash Flows—A Few Specific Issues
KEYWORDS: Bloom’s: Knowledge
DATE CREATED: 5/26/2015 9:01 AM
DATE MODIFIED: 7/21/2015 5:47 PM

6. Land is depreciated:
a. straight line over 27.5 years if they’re residential.
b. using MACRS.
c. straight line over 31.5 years for all property.
d. Land is never depreciated.
ANSWER: d
POINTS: 1
DIFFICULTY: Easy
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: FINA.LASH.17.11.03 – Estimating New Venture Cash Flows
NATIONAL STANDARDS: BUSPROG: Analytic – BUSPROG: Analytic skills: Statistics and Management Science
TOPICS: MACRS—A Note on Depreciation
KEYWORDS: Bloom’s: Knowledge
DATE CREATED: 5/26/2015 9:01 AM
DATE MODIFIED: 7/21/2015 5:48 PM

7. The cost of financing the project is reflected in the ____ in capital budgeting analysis.
a. initial outlay
b. incremental cash flows
c. cost of capital
d. All of the above
ANSWER: c
POINTS: 1
DIFFICULTY: Easy
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: FINA.LASH.17.11.01 – Cash Flow Estimation
NATIONAL STANDARDS: BUSPROG: Analytic – BUSPROG: Analytic skills: Statistics and Management Science
TOPICS: Project Cash Flows—A Few Specific Issues
KEYWORDS: Bloom’s: Knowledge
DATE CREATED: 5/26/2015 9:01 AM
DATE MODIFIED: 7/21/2015 5:49 PM

8. The ____ of a resource is its value in its best alternative use and is included in capital budgeting analysis.
a. opportunity cost
b. sunk cost
c. incremental cash flow
d. None of the above
ANSWER: a
POINTS: 1
DIFFICULTY: Easy
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: FINA.LASH.17.11.01 – Cash Flow Estimation
NATIONAL STANDARDS: BUSPROG: Analytic – BUSPROG: Analytic skills: Statistics and Management Science
TOPICS: Project Cash Flows—A Few Specific Issues
KEYWORDS: Bloom’s: Knowledge
DATE CREATED: 5/26/2015 9:01 AM
DATE MODIFIED: 7/21/2015 5:49 PM

9. For which of the following project types is cash flow estimation most difficult?
a. New Venture
b. Replacement
c. Expansion
d. New Market
ANSWER: a
POINTS: 1
DIFFICULTY: Easy
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: FINA.LASH.17.11.01 – Cash Flow Estimation
NATIONAL STANDARDS: BUSPROG: Analytic – BUSPROG: Analytic skills: Statistics and Management Science
TOPICS: The General Approach to Cash Flow Estimation
KEYWORDS: Bloom’s: Knowledge
DATE CREATED: 5/26/2015 9:01 AM
DATE MODIFIED: 7/21/2015 5:50 PM

10. Which of the following is not used in the development of cash flow estimates for capital projects?
a. Opportunity costs
b. Financing costs
c. Depreciation costs
d. Taxes
e. Overhead costs
ANSWER: b
POINTS: 1
DIFFICULTY: Easy
QUESTION TYPE: Multiple Choice
HAS VARIABLES: False
LEARNING OBJECTIVES: FINA.LASH.17.11.01 – Cash Flow Estimation
NATIONAL STANDARDS: BUSPROG: Analytic – BUSPROG: Analytic skills: Statistics and Management Science
TOPICS: Project Cash Flows—A Few Specific Issues
KEYWORDS: Bloom’s: Knowledge
DATE CREATED: 5/26/2015 9:01 AM
DATE MODIFIED: 7/21/2015 5:51 PM