1. Which items are necessary in calculating the net present value of a project?      I. Investment outlays      II. Discount rate      III. Incremental cash flow      IV. Time period for the project I, II and IV I, II and III II, III and IV All of the above 2---- Operating cash flow is generated by a company's daily operations related to production and sales of goods and/or services. True False 3. Scenario analysis is a way of testing forecasts by changing one assumption at a time. True False 4— . Suppose a riskless project requires an initial investment of $10 and will generate a one-time cash inflow of $30 two years later. Assuming a risk-free interest rate of 5%, which of the following statements about the project is NOT true? The net present value of the project is positive. The IRR is greater than 50 percent. The accounting rate of return on the project is positive. The payback period is less than 2 years 5----Analysis of a company's financial statements: Below are simplified versions of the balance sheet and income statement for Toys by Tom, Inc. Use this information to answer the following question. Toys by Tom, Inc. has a current ratio of ____, suggesting ________. Top of Form · 9.6; reasonable ability to cover interest expense · 0.57; potential illiquidity · 0.21; potential collection problems · 1.75; reasonable liquidity Bottom of Form 6---It is possible for a company to grow faster than its sustainable growth rate. Top of Form · True · False Bottom of Form 7---Selecting investment projects according to rules based either on project NPV or IRR results in maximizing firm value. Top of Form · True · False Bottom of Form 8---Analysis of a company's financial statements: Below are simplified versions of the balance sheet and income statement for Toys by Tom, Inc. Use this information to answer the following question. What is Toys by Tom, Inc. return on assets (ROA)? Top of Form · 6.9% · 0.86 Bottom of Form 9---Which of the following is commonly used in preparing pro forma statements: Top of Form · Historical financial statements · Projected sales · Efficiency ratios · All of the above Bottom of Form 10----For which of the following generic businesses would you expect a combination of high asset turnover and low profit margins? Top of Form · Supermarkets · Banks · Software developers · Airlines Bottom of Form 11----A company can shorten its cash cycle by: Top of Form · Reducing inventory turnover · Reducing account payables · Reducing days receivable · None of the above Bottom of Form 12---For a levered firm, EBIT is equivalent to: Top of Form · Net income · Pro forma earnings · Operating profit · Net income before taxes Bottom of Form 13----The amount by which a project increases the value of the firm is given by the project’s ______. Top of Form · accounting rate of return · net present value (NPV) · internal rate of return (IRR) · present value Bottom of Form 14 ...

1. 1.
Which items are necessary in calculating the net present value
of a project?
I. Investment outlays
II. Discount rate
III. Incremental cash flow
IV. Time period for the project
I, II and IV
I, II and III
II, III and IV
All of the above
2----
Operating cash flow is generated by a company's daily
operations
related to production and sales of goods and/or services.
True
False
3.
Scenario analysis is a way of testing forecasts by changing one
assumption at a time.
True
False

2. 4—
.
Suppose a riskless project requires an initial investment of $10
and
will generate a one-time cash inflow of $30 two years later.
Assuming
a risk-free interest rate of 5%, which of the following
statements
about the project is NOT true?
The net present value of the project is positive.
The IRR is greater than 50 percent.
The accounting rate of return on the project is positive.
The payback period is less than 2 years
5----Analysis of a company's financial statements: Below are
simplified versions of the balance sheet and income statement
for Toys by Tom, Inc. Use this information to answer the
following question.
Toys by Tom, Inc. has a current ratio of ____, suggesting
________.
Top of Form
·
9.6; reasonable ability to cover interest expense
·
0.57; potential illiquidity
·
0.21; potential collection problems
·
1.75; reasonable liquidity
Bottom of Form

3. 6---It is possible for a company to grow faster than its
sustainable growth rate.
Top of Form
·
True
·
False
Bottom of Form
7---Selecting investment projects according to rules based either
on project NPV or IRR results in maximizing firm value.
Top of Form
·
True
·
False
Bottom of Form
8---Analysis of a company's financial statements: Below are
simplified versions of the balance sheet and income statement
for Toys by Tom, Inc. Use this information to answer the
following question.
What is Toys by Tom, Inc. return on assets (ROA)?
Top of Form
·
6.9%
·
0.86
Bottom of Form
9---Which of the following is commonly used in preparing pro

4. forma statements:
Top of Form
·
Historical financial statements
·
Projected sales
·
Efficiency ratios
·
All of the above
Bottom of Form
10----For which of the following generic businesses would you
expect a combination of high asset turnover and low profit
margins?
Top of Form
·
Supermarkets
·
Banks
·
Software developers
·
Airlines
Bottom of Form
11----A company can shorten its cash cycle by:
Top of Form
·
Reducing inventory turnover
·

5. Reducing account payables
·
Reducing days receivable
·
None of the above
Bottom of Form
12---For a levered firm, EBIT is equivalent to:
Top of Form
·
Net income
·
Pro forma earnings
·
Operating profit
·
Net income before taxes
Bottom of Form
13----The amount by which a project increases the value of the
firm is given by the project’s ______.
Top of Form
·
accounting rate of return
·
net present value (NPV)
·
internal rate of return (IRR)
·
present value
Bottom of Form

6. 14----A dollar today is worth more than a dollar tomorrow.
Top of Form
·
True
·
False
Bottom of Form
15---The NPV rule, which says companies should invest in
projects for which NPV is greater than 0, depends on the
assumption of value maximization.
Top of Form
·
True
·
False
Bottom of Form
16---A company has a retention rate of 50%, sales of $25,000,
beginning equity of $50,000 and profit margins of 10%, an asset
turnover ratio of .75 and debt of $10,000. What is its
sustainable growth rate?
Top of Form
·
2.5%
·
1.7%
·

7. 3.75%
·
Not enough information given
Bottom of Form
17---Common-size financial statements are constructed in order
to:
Top of Form
·
Adjust for inflation and risk
·
Facilitate comparisons of different-sized companies
·
To comply with SEC requirements
·
All of the above
Bottom of Form
18---Leverage and liquidity generally rise or fall together.
Top of Form
·
True
·
False
Bottom of Form
19---Which of the following ratios uses sales in the
denominator?
Top of Form
·
Days in inventory

8. ·
Receivables turnover
·
Cash ratio
·
Average collection period
Bottom of Form
20--What is the present value of a perpetuity of $100 given a
discount rate of 5%?
Top of Form
·
$2,000
·
$3,000
·
$1,500
·
$500
Bottom of Form
21---Compute the net present value of an investment with 5
years of annual cash inflows of $100 and two cash outflows, one
today of $100 and one at the beginning of the second year of
$50. Use a discount rate of 10 percent.
Top of Form
·
$229.08
·
$287.60
·
$233.62
·

9. $271.53
Bottom of Form