Answered: The process by which management plans,…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 10QTD

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To make a capital investment decision, a manager must a. estimate the quantity and timing of cash flows. b. assess the risk of the investment. c. consider the impact of the investment on the firms profits. d. choose a decision criterion to assess viability of the investment (such as payback period or NPV). e. All of these.
The third step for making a capital investment decision is to establish baseline criteria for alternatives. Which of the following would not be an acceptable baseline criterion? A. payback method B. accounting rate of return C. internal rate of return D. inventory turnover
Which of the following statements is true? a. The fixed asset turnover ratio assists managers in determining the estimated future capital expenditures that are needed. b. The average age of the fixed assets is computed by dividing accumulated depreciation by depreciation expense. c. If net sales increases, the fixed asset turnover ratio will decrease. d. A relatively low fixed asset turnover ratio signals that a company is efficiently using its assets.
In practice, external factors can impact a capital investment. Give a current external factor that may currently Impact or cause instability of capital spending either here or abroad.
Capital investment decisions involve investments in long-term operational assets. TRUE OR FALSE?
Why working capital management is important for any organization? Explain the different approaches used for current asset investment policies. Explain the different approaches used for current asset financing policies.
Explain what net operating working capital is, and explain how changes in that quantity can affect the cash flows of an investment proposal
Deciding a firm's capital structure can be understood as: a. a capital budgeting decision b. a capital structure decision c. a primary market decision d. an asset efficiency decisionn\
Deciding a firm's capital structure can be understood as: a. a capital budgeting decision b. a capital structure decision c. a primary market decision d. an asset efficiency decision
How can you explain working capital management? Explain different policies/approaches to manage permanent and temporary current assets.
The cost of capital used in capital budgeting should reflect the average cost of the various sources of short-term funds a firm uses to acquire assets. True False
Which of the following scenario shows the financial manager’s financing function? a. Prioritizing investments based on properly computed capital rationing method. b. Capital budgeting computation and decision with regards to the planned acquisition. c. Assessing and selecting a long-term and short-term financing tools that has a low cost. d. Monitoring trends in operating expenses for the purpose of budget allocation.

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The process by which management plans, evaluates, and controls long-term investment decisions involving fixed assets is called capital investment analysis. True O False