Fin Quiz4Quiz 4
Name: __________________________ Date: _____________________
1. Any changes to a firm's projected future cash flows that are caused by adding a new project are referred to as which one of the following?
A. Eroded cash flows
B. Deviated projections
C. Incremental cash flows
D. Directly impacted flows
E. Assumed flows
2. Which one of the following principles refers to the assumption that a project will be evaluated based on its incremental cash flows?
A. Forecast assumption principle
B. Base assumption principle
C. Fallacy principle
D. Erosion principle
E. Stand-alone principle
3. A cost that should be ignored when evaluating a project because that cost has already been incurred and cannot be recouped is referred to as which type of cost?
4. Which one of the following terms refers to the best option that was foregone when a particular investment is selected?
A. Side effect
C. Sunk cost
D. Opportunity cost
E. Marginal cost
5. A pro forma financial statement is a financial statement that:
A. expresses all values as a percentage of either total assets or total sales.
B. compares actual results to the budgeted amounts.
C. compares the performance of a firm to its industry.
D. projects future years' operations.
E. values all assets based on their current market values
6. Which one of the following terms is most commonly used to describe the cash flows of a new project that are simply an offset of reduced cash flows for a current project?
A. Opportunity cost
B. Sunk cost
D. Replicated flows
E. Pirated flows
7. The payback period is the length of time it takes an investment to generate sufficient cash flows to enable the project to:
A. produce a positive annual cash flow.
B. produce a positive cash flow from assets.
C. offset its fixed expenses.
D. offset its total expenses.
E. recoup its initial cost....