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Commerce and BusinessbackBusinessbackCorporate Finance/Financial ManagementbackFundamentals of Corporate FinancebackPractice Set 2491back

Project Analysis And Evaluation

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Question 1
Free
Multiple Choice

Forecasting risk is defined as the possibility that:

Choose correct answer/s
A

some proposed projects will be rejected.

B

some proposed projects will be temporarily delayed.

C

incorrect decisions will be made due to erroneous cash flow projections.

D

some projects will be mutually exclusive.

E

tax rates could change over the life of a project.

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Question 2
Free
Multiple Choice

Scenario analysis is defined as the:

Choose correct answer/s
A

determination of the initial cash outlay required to implement a project.

B

determination of changes in NPV estimates when what-if questions are posed.

C

isolation of the effect that a single variable has on the NPV of a project.

D

separation of a project's sunk costs from its opportunity costs.

E

analysis of the effects that a project's terminal cash flows has on the project's NPV.

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Question 3
Free
Multiple Choice

An analysis of the change in a project's NPV when a single variable is changed is called _____ analysis.

Choose correct answer/s
A

forecasting

B

scenario

C

sensitivity

D

simulation

E

break-even

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Question 4
Free
Multiple Choice

An analysis which combines scenario analysis with sensitivity analysis is called _____ analysis.

Choose correct answer/s
A

forecasting

B

combined

C

complex

D

simulation

E

break-even

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Question 5
Free
Multiple Choice

Variable costs can be defined as the costs that:

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A

remain constant for all time periods.

B

remain constant over the short run.

C

vary directly with sales.

D

are classified as non-cash expenses.

E

are inversely related to the number of units sold.

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Question 6
Multiple Choice

Fixed costs:

Choose correct answer/s
A
change as a small quantity of output produced changes.
B
are constant over the short-run regardless of the quantity of output produced.
C
are defined as the change in total costs when one more unit of output is produced.
D
are subtracted from sales to compute the contribution margin.
E
can be ignored in scenario analysis since they are constant over the life of a project.
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Question 7
Multiple Choice

The change in revenue that occurs when one more unit of output is sold is referred to as:

Choose correct answer/s
A
marginal revenue.
B
average revenue.
C
total revenue.
D
erosion.
E
scenario revenue.
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Question 8
Multiple Choice

The change in variable costs that occurs when production is increased by one unit is referred to as the:

Choose correct answer/s
A
marginal cost.
B
average cost.
C
total cost.
D
scenario cost.
E
net cost.
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Question 9
Multiple Choice

By definition,which one of the following must equal zero at the accounting break-even point?

Choose correct answer/s
A
net present value
B
internal rate of return
C
contribution margin
D
net income
E
operating cash flow
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Question 10
Multiple Choice

By definition,which one of the following must equal zero at the cash break-even point?

Choose correct answer/s
A
net present value
B
internal rate of return
C
contribution margin
D
net income
E
operating cash flow
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Question 11
Multiple Choice

Which one of the following is defined as the sales level that corresponds to a zero NPV?

Choose correct answer/s
A
accounting break-even
B
leveraged break-even
C
marginal break-even
D
cash break-even
E
financial break-even
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Question 12
Multiple Choice

Operating leverage is the degree of dependence a firm places on its:

Choose correct answer/s
A
variable costs.
B
fixed costs.
C
sales.
D
operating cash flows.
E
net working capital.
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Question 13
Multiple Choice

Which one of the following is the relationship between the percentage change in operating cash flow and the percentage change in quantity sold?

Choose correct answer/s
A
degree of sensitivity
B
degree of operating leverage
C
accounting break-even
D
cash break-even
E
contribution margin
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Question 14
Multiple Choice

Bell Weather Goods has several proposed independent projects that have positive NPVs.However,the firm cannot initiate any of the projects due to a lack of financing.This situation is referred to as:

Choose correct answer/s
A
financial rejection.
B
project rejection.
C
soft rationing.
D
marginal rationing.
E
capital rationing.
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Question 15
Multiple Choice

The procedure of allocating a fixed amount of funds for capital spending to each business unit is called:

Choose correct answer/s
A
marginal spending.
B
capital preservation.
C
soft rationing.
D
hard rationing.
E
marginal rationing.
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Question 16
Multiple Choice

PC Enterprises wants to commence a new project but is unable to obtain the financing under any circumstances.This firm is facing:

Choose correct answer/s
A
financial deferral.
B
financial allocation.
C
capital allocation.
D
marginal rationing.
E
hard rationing.
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Question 17
Multiple Choice

Forecasting risk emphasizes the point that the correctness of any decision to accept or reject a project is highly dependent upon the:

Choose correct answer/s
A
method of analysis used to make the decision.
B
initial cash outflow.
C
ability to recoup any investment in net working capital.
D
accuracy of the projected cash flows.
E
length of the project.
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Question 18
Multiple Choice

Steve is fairly cautious when analyzing a new project and thus he projects the most optimistic,the most realistic,and the most pessimistic outcome that can reasonably be expected.Which type of analysis is Steve using?

Choose correct answer/s
A
simulation testing
B
sensitivity analysis
C
break-even analysis
D
rationing analysis
E
scenario analysis
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Question 19
Multiple Choice

Scenario analysis is best suited to accomplishing which one of the following when analyzing a project?

Choose correct answer/s
A
determining how fixed costs affect NPV
B
estimating the residual value of fixed assets
C
identifying the potential range of reasonable outcomes
D
determining the minimal level of sales required to break-even on an accounting basis
E
determining the minimal level of sales required to break-even on a financial basis
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Question 20
Multiple Choice

Which one of the following will be used in the computation of the best-case analysis of a proposed project?

Choose correct answer/s
A
minimal number of units that are expected to be produced and sold
B
the lowest expected salvage value that can be obtained for a project's fixed assets
C
the most anticipated sales price per unit
D
the lowest variable cost per unit that can reasonably be expected
E
the highest level of fixed costs that is actually anticipated
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