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Category > Business & Finance Posted 15 Dec 2017 My Price 10.00

HOMEWORK – Chapter 11

Could you help me answer and explain each questions?


HOMEWORK – Chapter 11 PLEASE ANSWER QUESTIONS WITH AN EXPLANATION OF WHY A CERTAIN ANSWER IS CORRECT 1. A company is considering a new project. The CFO plans to calculate the project’s NPV by estimating the relevant cash flows for each year of the project’s life (i.e., the initial investment cost, the annual operating cash flows, and the terminal cash flow), then discounting those cash flows at the company’s overall WACC. Which one of the following factors should the CFO be sure to INCLUDE in the cash flows when estimating the relevant cash flows? a. All sunk costs that have been incurred relating to the project. b. All interest expenses on debt used to help finance the project. c. The investment in working capital required to operate the project, even if that investment will be recovered at the end of the project’s life. d. Sunk costs that have been incurred relating to the project, but only if those costs were incurred prior to the current year. e. Effects of the project on other divisions of the firm, but only if those effects lower the project’s own direct cash flows. 2. Which of the following factors should be included in the cash flows used to estimate a project’s NPV? a. All costs associated with the project that have been incurred prior to the time the analysis is being conducted. b. Interest on funds borrowed to help finance the project. c. The end-of-project recovery of any working capital required to operate the project. d. Cannibalization effects, but only if those effects increase the project’s projected cash flows. e. Expenditures to date on research and development related to the project, provided those costs have already been expensed for tax purposes. 3. Dalrymple Inc. is considering production of a new product. In evaluating whether to go ahead with the project, which of the following items should NOT be explicitly considered when cash flows are estimated? a. The company will produce the new product in a vacant building that was used to
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CourseLover
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Status NEW Posted 15 Dec 2017 02:12 PM My Price 10.00

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