Finc600 Week 2 Practice Quiz

(TCO 2) A statement that reports inflows and outflows of cash during the accounting period in the categories of operations, investing, and financing, is called a(an):

Incremental cash flows is the difference between the cash flows a company will have if it implements the new project versus the cash flows the company will have if they choose not to embark

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3. Geoff has a written agreement with Huck. To accomplish the objectives of this relationship, Geoff's authority can

9. What is the Cost of Debt, before and after taxes? Using the interest rate for the largest debt…cannot use the weighted interest rate for the debt since it includes capital lease obligations with no stated rate and could not find in the notes to the financials. 5.4% After tax cost is .054 x (1-.36) = 3.5%

B) a transaction in which the third party does not know the identity of the agent

There are 8 main diversity dimensions that determine whether people are in the majority or minority population. Which one of the following is NOT a dimension?

There are many tasks I have undertaken or completed in the last year or two that have nothing to do with academics or education. Even though these tasks have not been related to my education, they have helped me prepare for the tasks I plan to undertake in 2014.

Study Questions: Answer the following questions (based on the reading), save it and then submit it to the professor.

9. You want to purchase a business with the following cash flows. How much would you pay for this business today assuming you needed a 14% return to make this deal?

Sonja is seriously injured in an auto accident. After six months, she is still unable to return to work. She has no income from her job, and the insurance premium payments are financially burdensome. In this case Sonja has an ordinary life insurance with the waiver-of-premium attached so after six months all premiums would be waived if Sonja is totally disabled. Under some policies, a retroactive refund of the premium paid during the first six months would be paid. (Rejda, George, McNamara, 2014).

1) Incremental cash flows are the cash flows that should be used in calculating the NPV of a project. The cash flows are changes in cash flows that occur as a direct consequence of accepting a project, not the cash flows that the company is already receiving.

b. The fair value of a liability cannot differ from the amount appearing on the balance

(Note: retained earnings information is irrelevant here) Part b. Total market value = debt + pref. equity + Common equity = 1,147,200 + 1,250,000 + 2,500,000 = $4,897,200

1. Incremental cash flows are ultimately the relevant cash flows to be used in project analysis. It is the difference between the cash flows the firm will have if it implements the project, and the cash flows the firm will have if it rejects the project. Although they are a cash expense, interest expenses are not included in project cash flows. We discount a projects cash flows by using its weighted average cost of capital (WACC), which already includes the cost of debt. Therefore, we do not include interest expenses in cash flows because it would essentially be counting them twice.