Which of the following statements is CORRECT? O Free cash flow (FCF) is defined as follows: FCF EBIT(1 - T) + Depreciation and Amortization - Capital expenditures required to sustain operations- Required changes in net operating working capital. O Changes in working capital have no effect on free cash flow. O Net cash flow (NCF) is defined as follows: NCF Net income - Depreciation and Amortization. O Net cash flow is the same as free cash flow (FCF). Free cash flow (FCF) is defined as follows: FCF EBIT(1 - T)+ Depreciation and Amortization + Capital expenditures.

Which of the following statements is CORRECT? O Free cash flow (FCF) is defined as follows: FCF EBIT(1 - T) + Depreciation and Amortization - Capital expenditures required to sustain operations- Required changes in net operating working capital. O Changes in working capital have no effect on free cash flow. O Net cash flow (NCF) is defined as follows: NCF Net income - Depreciation and Amortization. O Net cash flow is the same as free cash flow (FCF). Free cash flow (FCF) is defined as follows: FCF EBIT(1 - T)+ Depreciation and Amortization + Capital expenditures.

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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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
What does the term "Net Present Value (NPV)" represent in finance? a) The total revenue generated by an investment b) The difference between the present value of cash inflows and the present value of cash outflows c) The total cost of an investment project d) The total profit earned from an investment
In a cash flow statement which one of the following would appear as an inflow of cash? O The profit on sale of a fixed asset. A repayment of debenture loans. An issue of shares at a premium, An increase in stock during the year.
All parts detailed or skip
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.
When Generating a Statement of Cash Flows, the direct method of preparation would result in a greater value in Net Cash Provided by Operating Activities then the Indirect Method True False
Provide a brief explanation of why depreciation of capital assets is considered in determining potential net income from an investment, but not included in determining the net cash flow of an investment.
How can we show mathematically that the two approaches cash flow from operation and net income are identical?
Net present value is better than Payback period (PP)... OA. because it is a simple method OB. because it is a quick method ignoring the time value of money OC. because it fully addresses the timing of the cash flows O D. because it fully addresses the irrelevant cash flows
The payback period method is inferior to the net present value method because it ________. is difficult to compute Deals with accounting income rather than cash flows Fails to consider cash flows beyond the payback period
None
Cash flows that are directly associated with a project are called O sunk costs. terminal costs. incremental cash flows. current cash flows.

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