Ünite Sınavı Soruları

1. Estimating cash flow
2. Adding up the discounted cash flows to obtain NPV
3. Discounting cash flows by an appropriate discount rate
4. Projecting the risk differences of different projects

Which of the following are the steps of calculating net present value?

1. Managers have to realize and distinguish which variables are relevant to a particular project’s cash flow estimation, and which are not.
2. Only information which is relevant to the project’s analysis is used in developing forecasts.
3. Incremental cash flow refers to a change in a firm’s net cash flow attributable to an investment project.
4. Incremental cash flows occur as a direct result of accepting the project, and should be included in the evaluation.
5. Incremental cash flows may occur at the start of the project, may continue during the project, or may occur at the end of the project.

Which of the statements above related to incremental cash flow are correct?

Which of the following are the type of projects in which selecting one project prevents other projects from being undertaken?

Which of the following term refers to a firm’s attribute that may allow the firm to generate economic profits?

Positive economic profits (or positive net present value projects) can stem from two sources: 1) ...... , 2) creating competitive advantage.

Which of the following completes the sentence above?

Which of the following refers to all kinds of spendings made to acquire, sustain and increase production factors?

1. Real options analysis
2. Scenario analysis
3. Decision trees
4. Sensitivity analysis
5. Simulation analysis

Which of the above are used to measure a project’s risks coming from various sources rather than in general manner?

1. There are two very important items that are related to the estimation of investment projects’ cash flows: financing costs and depreciation.
2. Financing costs are irrelevant cash flows to capital investment project evaluation which should not be included in the analysis.
3. Financing costs are incorporated in the capital budgeting analysis with the determination of discount rate, rather than with the estimation of cash flows.
4. Depreciation is considered as a relevant cash flow to capital investment project evaluation which should be included in the analysis.
5. A project’s cash flow is equal to net income of project plus depreciation.

Which of the statements above related to the estimation of investment projects’ cash flows are correct?

1. Identifying potential investments
2. Analyzing the set of investment opportunities
3. Implementing and monitoring the selected investment projects
4. Sustaining generation of the expected cash flow

Which of the above are the basic steps of capital budgeting process?

1. Expansion options are options to expand earlier successful investments of a company.
2. Follow-on investment options are options to make additional investments to earlier successful investments of a company.
3. Abandonment options are options to withdraw resources from a project that fails to live up to shortrun expectations
4. Flexibility options are options to have some flexibility about the course of a project such as input flexibility, operating flexibility, and capacity flexibility.

Which of the statements above related to typical options embedded in capital investment projects are correct?

In which of the following is the decision rule for internal rate of return technique given correctly if a project is independent?

What is the type of projects in which selecting one project prevents other projects from being undertaken?

1. Strategy refers to formulation and implementation of a company’s key decisions.
2. Corporate strategy refers to strategies for company’s whole portfolio of resources, and strategies for business unit’s products, as well.
3. Competitive advantage refers to a firm’s attribute that may allow the firm to generate economic profits.
4. Economic profit refers to the risk-adjusted present value of revenue minus all costs, including the opportunity cost of capital.

Which of the statements above related to corporate strategy and capital budgeting are correct?

A company has a budget of $50,000 for expansion projects. There are two projects such as A and B. If Projects A and B each cost $40,000, which of the following investment type explains the dependence between projects A and B?

1. If the net present value is greater than zero (positive net present value) for a project, it means that the project will increase the shareholder value by that amount.
2. If the net present value is smaller than zero (negative net present value) for a project, it means that the project will decrease the shareholder value by that amount.
3. Net present value technique finds the sum of present value of all cash inflaws and cash otflows of a project over its life.
4. If a project is independent, approve the project(s) that provide a positive net present value.
5. If a project is mutually exclusive, choose the project that provides the biggest net present value.

Which of the statements above related to net present value technique are correct?

The process of evaluating and selecting longterm investments which are consistent with the firm’s main objective of maximizing shareholders’ wealth is referred to as ......

Which one of the following refer to the options of managers about capital investment projects which can be priced by using stock option-pricing methodologies?

1. A simple approach to incorporate risk differences among alternative investment projects to evaluation process is making adjustments to either cash flows or the discount rate according to the risk of the projects.
2. One can account for risk differences among alternative investment projects by making adjustments to either cash flows or the discount rate.
3. Certainty-equivalent coefficient refers to a number between 0 and 1 which is used in order to reflect the risk of a project to evaluation.
4. In adjusted cash flow approach, one should use risk-free interest rate as a discount rate while calculating net present value because risk of a project is already included in cash flow adjustment.
5. If a project’s risk is substantially above the firm’s general risk, discount rate will be above the weighted average cost of capital.
6. If a project’s risk is substantially below the firm’s general risk, discount rate will be below the weighted average cost of capital.
7. For a given capital investment project, it would be appropriate to expect that a manager who is risk-averse adds a greater risk premium to discount rate than a manager who is risk-seeking.

Which of the statements above related to incorporating risk in capital budgeting are correct?