Exam 6: Evaluating the Financial Impact of Loans and Investments

When cash is received, it is considered to be ____.

In the IRR function, the guess argument is optional and should not be needed, but can be used if the ____ iterations that are automatically performed by Excel do not result in an accurate value.

Briefly describe each of the following depreciation methods: straight line depreciation, double-declining balance, sum of the years digits, and fixed-declining balance.

In projects where cash flows are negative at both the beginning and the end of the project life, the results of the NPV and IRR are often ____.

The payback period is the time it will take to ____.

The best chart to show a functional relationship, such as hurdle rate versus NPV, is ____.

Money is usually not the only component in a business decision.

Interest that is paid solely on the amount of the original principal value is called ____ interest.

A(n) balloon payment is additional money owed at the end of a loan. _________________________

IRR stands for the ____.

The correct function for the fixed-declining balance method is =DB(cost,salvage,life,period,____________________).

In the SLN function, the _____ argument is the number of periods over which the asset is depreciated.

Case 6-1 Phil has put together the worksheet above with a 5-year cash flow estimate for his shoe company. He needs to explain the chart to his investors. Please answer the questions below using this figure as a reference. -To determine the projected cash flow, Phil must now total the following: taxable income, depreciation added back to the cash flow, and principal payments deducted from the cash flow (already a negative value). Phil enters the following formula in cell C24 and copies it across the row: ____.

Depreciation needs to be _____ the cash flow in each year to calculate taxes for that year.

The RATE function syntax is as follows: =RATE(nper,pmt,pv,fv,____________________,[guess]).

Case 6-2 Natalie is working on calculating the IRR of a project. Please refer to the figure above as you answer the questions below. -Natalie knows the syntax of the IRR function is as follows: IRR(values,[guess]). The values argument is a list of positive and negative cash flows. For this function to work, ____.

The IPMT function calculates the value of the interest payment for a specified period. _________________________

=CIPMT(rate,nper,pv,start_period,end_period,type) returns the cumulative interest paid on a loan between start_period and end_period. _________________________

In financial functions, the default transaction (type ____) indicates payments are made at the end of each period.

If you are calculating a positive future value (money being withdrawn from a bank, which is a positive cash flow), your formula requires a negative ____.