I. Which of the following are examples of an incremental cash flow? I. An increa

Question

I. Which of the following are examples of an incremental cash flow? I. An increase in accounts receivable Il. A decrease in net working capital IlI. An increase in taxes IV. A decrease in the cost of goods sold A I and IlIlonly B. IlI and IV only C. I and IV only D. I, III, and IV only E. I, II, III and IV If a project has a net present value equal to zero, then: I. the present value of the cash inflows exceeds the initial cost of the Il. the project produces a rate of return that just equals the rate required to a project lll, the project is expected to produce only the minimally required cash IV. any delay in receiving the projected cash inflows will cause the project to negative net present value. 2. A. Il and Ill only B. Il and IV only C. I, II, and IV only D. II, IlI, and IV only E. I, II, and IlI only 3. The sales level that results in a project's net income exactly equaling zero is called th break-even A. Operational B. Leveraged C. Accounting D. Cash E. Present value 4. Sensitivity analysis helps you determine the A range of possible outcomes given possible ranges for every variable B. degree to which the net present value reacts to changes in a single variable. C. net present value given the best and the worst possible situations D degree to which a project is reliant upon the fixed costs of variable costs in relation to the fixed costs of a project

Explanation / Answer

1-

A

1st and 3rd only

2-

A

Project NPV would be zero when IRR is equal to required rate of return and present value of cash flow equal to cash outflow

3-

C

Accounting break even point Is the point where cost equal to profit and no profit

4-

C

net present value given the best and the worst possible situation

2-

1-

A

1st and 3rd only

2-

A

Project NPV would be zero when IRR is equal to required rate of return and present value of cash flow equal to cash outflow

3-

C

Accounting break even point Is the point where cost equal to profit and no profit

4-

C

net present value given the best and the worst possible situation

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