Question 1

Which of the following characteristics relate to the cash break-even point for a given project?
I.The project never pays back.
II.The IRR equals the required rate of return.
III.The NPV is negative and equal to the initial cash outlay.
IV.The operating cash flow is equal to the depreciation expense.

Accepted Answer

A)  I and III only
B)  II and IV only
C)  I, II, and III only
D)  II, III, and IV only
E)  I, II, III, and IVF) All of the above
G) B) and D)

Question 2

A project has a payback period that exactly equals the project's life.The project is operating at:

Accepted Answer

A)  its maximum capacity.
B)  the financial break-even point.
C)  the cash break-even point.
D)  the accounting break-even point.
E)  a zero level of output.F) All of the above
G) C) and D)

Question 3

Which one of the following statements concerning scenario analysis is correct?

Accepted Answer

A)  The pessimistic case scenario determines the maximum loss, in current dollars, that a firm could possibly incur from a given project.
B)  Scenario analysis defines the entire range of results that could be realized from a proposed investment project.
C)  Scenario analysis determines which variable has the greatest impact on a project's final outcome.
D)  Scenario analysis helps managers analyze various outcomes that are possible given reasonable ranges for each of the assumptions.
E)  Management is guaranteed a positive outcome for a project when the worst case scenario produces a positive NPV.F) A) and B)
G) A) and C)

Question 4

Mr.Bear,your boss,will only agree to accept a project that,as a minimum,provides a rate of return equal to the requirement he has set for the project.Given this,explain how you can use break-even analysis to ascertain which projects will be acceptable to him as you don't want to risk hearing him growl if you waste his time presenting him with a project that is unacceptable.

Accepted Answer

The financial break-even quantity is the...

Question 5

Forecasting risk is defined as the possibility that:

Accepted Answer

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.F) D) and E)
G) A) and E)

Question 6

Theresa is analyzing a project that currently has a projected NPV of zero.Which of the following changes that she is considering will help that project produce a positive NPV instead? Consider each change independently.
I.increase the quantity sold
II.decrease the fixed leasing cost for equipment
III.decrease the labor hours needed to produce one unit
IV.increase the sales price

Accepted Answer

A)  I and II only
B)  I and IV only
C)  II, III, and IV only
D)  I, II, and IV only
E)  I, II, III, and IVF) A) and B)
G) B) and E)

Exam 11: Project Analysis and Evaluation

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A project has a payback period that exactly equals the project's life.The project is operating at:

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Correct Answer
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The financial break-even quantity is the...
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Which of the following characteristics relate to the cash break-even point for a given project? I.The project never pays back. II.The IRR equals the required rate of return. III.The NPV is negative and equal to the initial cash outlay. IV.The operating cash flow is equal to the depreciation expense.

Correct Answer
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Forecasting risk is defined as the possibility that:

Correct Answer
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Which one of the following statements concerning scenario analysis is correct?

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Exam 11: Project Analysis and Evaluation

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A project has a payback period that exactly equals the project's life.The project is operating at:

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Correct AnswerverifiedThe financial break-even quantity is the...View AnswerShow Answer

Correct AnswerverifiedShow Answer

Forecasting risk is defined as the possibility that:

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Which one of the following statements concerning scenario analysis is correct?

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Correct Answer
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Correct Answer
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Correct Answer
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The financial break-even quantity is the...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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