For what reasons would a firm use a financial model in projecting future cash flows from an investment, and what are the primary factors to consider when making the cash flow estimates?
For what reasons would a firm use a financial model in projecting future cash flows from an investment, and what are the primary factors to consider when making the cash flow estimates?
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TWO:
Which of the following elements is a part of relevant cash flow?
a.Net income
b.Deprecation
c. Change in working capital
d.Capital Investment
e.All of the above
Residual cash flows are estimated when:
a.The useful lives of alternatives are different
b.One asset has a shorter economic life than its alternatives
c.One asset has a longer economic life than its alternative
d.A and B
e.A, B, and C
The cost of capital can be defined as:
| A. the weighted average cost of attracting investors to the firm. |
| B. the price of obtaining funding for the firm, weighted according to target ratios in the capital structure. |
| C. less than the weighted average return that investors in the firm require. |
| D. A and B. |
| E. A, B, and C. |
Gilbert Jones is saving for a new outboard motor. He needs to have $10,000, 4 years from now. How much must he set aside now to have $10,000, 4 years from now if money compounds at 12% annually?
a.$6310
B)6355
c.6332
d.6106
e.None of the above
When projecting financial statements, the balance sheet will
a.Always balance
b.Never balance
c.None of the above
Profit margin and asset turnover are combined to yield
a.EPS
b.Payout
c.ROA
d.ROE
e.None of the above
As the interest rate used to discount future cash flows is decreased, present value of the future cash inflows:
a.increase
b.decreases
c.stays the same