Net capital spending: Multiple Choice O O O is equal to ending net fixed assets minus beginning net fixed assets. is equal to zero if the decrease in the net fixed assets is equal to the depreciation expense. reflects the net changes in total assets over a stated period of time. is equivalent to the cash flow from assets minus the operating cash flow minus the change in net working capital.

Net capital spending: Multiple Choice O O O is equal to ending net fixed assets minus beginning net fixed assets. is equal to zero if the decrease in the net fixed assets is equal to the depreciation expense. reflects the net changes in total assets over a stated period of time. is equivalent to the cash flow from assets minus the operating cash flow minus the change in net working capital.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Financial assets management decision-making often involves determination of the Present Value (PV) of the flow of money over time. If a monetary PV is given by: PV = Gt/(1+m)t (i) Identify and explain each of the variables: G, m, and t. (ii) Explain how an increase in m would impact the PV of this financial asset. (iii) Find how much would be required to generate a PV of 890, over a 5 years period, at a constant annual interest rate of 4 percent.
The Payback method takes the initial investment and divides it by the accelerated depreciation per year of the investment True False In the Statement of Cash Flows, depreciation is ignored because it is a non cash expense. True False
Which of the following best describes the process of capital budgeting? a Forecasting revenues and expenses hmiting funds for capital improvements without considering the profitability of proposed prot determining a companys short term goals d. determinung the amount to spend on fixed assets and which fixed assets to purchase
I. If there is a positive NPV, IRR is higher than the cost of capital.II. If annual net cash inflow is equal to the cost of investment, then, NPV is zero. A• FF B• TF C• TT D• FT
Select all of the following that managers can use to evaluate capital invesments. (Select all that apply.) High-Low Method Net present value method LIFO Method Internal rate of return method FIFO Method Annual rate of return Cash payback technique Depreciation method
1. Define capital expenditures and provide examples of capital expenditures.2. Cash flows for a particular project should be measured on an incremental basis. What does that mean?3. How does the opportunity cost concept affect capital budgeting cash flow determination?4. What factors should be considered when estimating a new business’ NINV? Is it any different for an asset replacement project. 5. Why is depreciation, a noncash expense, considered when estimating a project’s net cash flows?6. What are the potential tax consequences of selling an old asset in an asset replacement investment decision?
A characteristic of the payback method is that it: (See your Chapter 25 notes, page 9) Uses accrual accounting inflows in the numerator of the calculation Uses the estimated expected useful life of the asset in the denominator of the calculation Incorporates cash flows received after the payback period has been reached Is based on accounting income Incorporates the time value of money Ignores total project profitability
) Assuming a 9% cost of capital, find the modified internal rate of return for the following cash flows: a. 19.78% b. 6.95% c. 13.64% d. 7.86% Year Cash Flow 0 1 2 3 -$175 $167 $240 -$120
How does depreciation enter into the calculation of operating cash inflows? Explain theu underlyinglogic of such calculation process. Why is it important to evaluate capital budgetingp projectson the basis of incremental cash flows?
Take me to the text The following table indicates the net cash flows of a capital asset: Year Net Cash Flow 0 $-13,900 1 $5,500 2 $9,600 Do not enter dollar signs or commas in the input boxes. Use the negative sign where appropriate. Round the factor to 4 decimal places and the NPV to the nearest whole number. Assume the required rate of return is 13%. Determine the net present value of this asset. Year Net Cash Flow 0 1 2 Total $-13,900 $5,500 $9,600 Factor Net Present Value SA $ A
b. Disregard the assumptions in Part a. What is the depreciable basis? What are the annual depreciation expenses? c. Calculate the annual sales revenues and costs (other than depreciation). Why is it important to include inflation when estimating cash flows? d. Calculate annual net operating profit after sales (NOPAT). Then calculate the operating cash flows.
Prepare a cash flow analysis which includes: 1.the initial investment, 2. the annual after-tax operating cash flows, and 3.the terminal year non-operating cash flow in year 5.

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