When performing capital budgeting and considering replacement projects, one factor that must be considered is the potential salvage value of equipment that is no longer needed.
a) taxation
b) salvage value
c) sunk costs
d) depreciation
Select one disadvantage of IRR as a capital budget method.
a) It is not useful for comparing projects with different lifespans.
b) It can only be used with projects that have positive cash flows.
c) It can be difficult to interpret and understand.
d) It fails to account for the time value of money.
With respect to payroll disbursements, one way a company can manage their cash more efficiently is to use lockbox banking.
a) limit outsourcing
b) implement check kiting
c) increase float time
d) use lockbox banking
Which of the following is an example of a market risk for a company that manufactures automobiles?
a) A downgrade in the company's credit rating
b) Supply chain disruptions due to civil war in a country that supplies material
c) A massive lawsuit against the manufacturer over worker safety
d) A drop in demand due to the rise of ride-sharing as an alternative to automobile ownership
Consider the following data from a company's 95-day operating cycle:
Payable days: 8
Receivable days: 25
Inventory days: 70
What is the cash conversion cycle for this company?
a) 87
b) 103
c) 47
d) 53
Farrah owns 500 shares of stock valued at $30/share in Company A.
After the company issues a 3% stock dividend, what does Farrah own?
a) 500 shares valued at $30.90/share
b) 515 shares valued at $30/share
c) 500 shares valued at $30/share
d) 515 shares valued at $29.13/share