The pattern of cash flow stream that is the most difficult to use when evaluating projects? |
Noncoventional Flow |
A conventional cash flow pattern associated with capital investment projects consists of an initial ___________ |
outflow followed by a series of inflows |
Cash outlays that had been previously made and have no effect on the cash flows relevant to a current decision are called _________ |
sunk cost |
_________ projects have the same function; the acceptance of one ________ the others from consideration |
Mutually exclusive; eliminates |
A firm with limited dollars available for capital expenditures is subject to _________ |
capital rationing |
A non – conventional cash flow pattern associated with capital investment projects consists of an initial |
outflow followed by a series of both cash inflows and outflows |
The _________ reflects the return that must be earned on the given project to compensate the firm’s owners adequately according to the project’s variability of cash flows |
risk – adjusted discount rate |
A tax adjustment must be made in determining the cost of _________ |
long – term debt |
A $60,000 outlay for a new machine with a usable life of 15 years is called ________ |
capital expenditure |
The ________ is the rate of return a firm must earn on its investments in projects in order to maintain the market value of its stock |
cost of capital |
The cost of capital reflects the cost of funds |
over a long – run time period |
All of the following are motives for capital budgeting expenditures EXCEPT |
invention |
Relevant cash flows for a project are best described as _________ |
incremental cash flows |
Examples of sophisticated capital budgeting techniques include all of the following EXCEPT |
payback period |
__________ projects do not compete with each other; the acceptance of one _________ the others from consideration |
Independent; does not eliminate |
Initial cash flows and subsequent operating cash flows for a project are sometimes referred to as |
relevant cash flows |
__________ is the process of evaluating and selecting long – term investments consistent with the firm’s goal of owner wealth maximization |
Capital budgeting |
The __________ approach is used to convert the net present value of unequal – lived projects into an equivalent annual amount (in net present value terms) |
annualized net present value |
The first step in the capital budgeting process is |
proposal generation |
Some firms use the payback period as a decision criterion or as a supplement to sophisticated decision techniques, because |
it can be viewed as a measure of risk exposure because of its focus on liquidity |
The __________ is the firm’s desired optimal mix of debt and equity financing |
target capital structure |