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FINA 3313 FINAL EXAM STUDY GUIDE exam question and answer latest update
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FINA 3313 FINAL EXAM STUDY GUIDE exam question and answer latest update
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FINA 3313 FINAL EXAM STUDY GUIDE Commodore Corporation is deciding whether it makes sense to invest in a project today, or to postpone this decision for one year. Which of the following statements best describes the issues that Commodore faces when considering this investment timing optio n? A. The investment timing option does not affect the expected cash flows and should therefore have no impact on the project's risk. B. The more uncertainty about the project's future cash flows the more likely it is that Commodore will go ahead with the project today. C. If the project has a positive expected NPV today, this means that its expected NPV will be even higher if it chooses to wait a year. D. All of the above statements are correct. E. None of the above statements is correct. - correct answer E. None of the above statements is correct. The option for a firm to expand future production has value because: A. the future holds uncertainty. B. the option requires no investment today. C. future production will be profitable. D. today's production costs are lower than in the future. - correct answer A. the future holds uncertainty. Which of the following changes, if of a sufficient magnitude, could turn a negative NPV project into a positive NPV project? A. A decrease in the estimated annual sales B. An increase in the discount rate C. An increase in the initial investment D. A decrease in the fixed costs - correct answer D. A decrease in the fixed costs NPV = PV (CF) - Initial What is the equivalent annual cost for a project that requires a 40,000 usd investment at time -period zero, and a 10,000 usd annual expense during each of the next 4 years, if the opportunity cost of capital is 10%? A. $20,000.00 B. $21,356.95 C. $22,618.83 D. $25,237.66 - correct answer C. $22,618.83 Eqiv Annual Cost 1. Compute NPV 2. Annualize = compute PMT The optimal capital structure is the mix of debt and equity that; A. minimizes the cost of capital B. maximizes the cost of capital C. maximizes the use of debt D. minimizes the use of debt - correct answer A. minimizes the cost of capital negative NPV for the firm. POSITIVE NPV IS MAXIMIZING SHAREHOLDER WEALTH NPV = PV (OCF) - 100 Break -even revenues on an accounting basis typically indicate a: A. high degree of operating leverage. B. positive NPV for the firm. C. negative NPV for the firm. D. downturn in the business cycle. - correct answer C. negative NPV for the firm. POSITIVE NPV IS MAXIMIZING SHAREHOLDER WEALTH NPV = PV (OCF) - 100 Which of the following statements is most correct? A. Since debt financing raises the firm's financial risk, raising a company's debt ratio will always increase the company's WACC. B. Since debt financing is cheaper than equity financing, raising a company's debt ratio will always reduce the company's WACC. C. Increasing a company's debt ratio will typically reduce the marginal cost of both debt and equity financing; however, it still may raise the company's WACC. D. Statements a and c are correct. E. None of the statements above is correct. - correct answer E. None of the statements above is correct. What is the accounting break -even level of revenues for a firm with $6 million in sales, variable costs of 3.9 million usd, fixed costs of 1.2 million usd, and depreciation of 1 million usd? A. $6,557,377 B. $3,428,571 C. $6,285,714 D. $6,100,000 - correct answer C. $6,285,714 6,000,000 - 3,900,000 - 1,200,000 -1,000,000 = -100,000 VC = 3. = 0.65 S - 0.65S - 1,200,000 - 1,000,000 = 0The benefits of buying summaries with Stuvia:
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