Chapter 6 Sample Questions - Corporate Financial Management | FIN 4360, Assignments of Finance

Download Chapter 6 Sample Questions - Corporate Financial Management | FIN 4360 and more Assignments Finance in PDF only on Docsity! Chapter 6 Questions 1. Assume that the opportunity cost of capital for projects 1) through 4) is 10%. For which of the following project or projects will the Internal Rate of Return rule give same indication as the NPV rule about which projects should be undertaken? 1) 2) 3) 4) a. only 1) b. only 2) c. 1) and 2) d. 1), 2), 3), and 4) e. 1), 2), and 4) f. none of the above 2. Given the following information regarding a new project, how would you calculate the EVA for the project 2 years from now? Cost of project = $1,500,000; Life of project = 3 years; Depreciation method = straight line; Cash flow that the project will generate each of the 3 years = $600,000; Project’s cost of capital = 7%. a. EVA2 = 600,000 - .07(1,500,000) – 500,000 b. EVA2 = 1,200,000 - .07(1,500,000) – 1,500,000 c. EVA2 = 600,000 - .07(1,000,000) – 1,500,000 d. EVA2 = 600,000 - .07(1,000,000) – 500,000 e. EVA2 = 1,200,000 - .07(500,000) – 1,000,000 f. EVA2 = 600,000 - .07(500,000) – 500,000 Correct answers: 1. a; 2. d