Question 1

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

Accepted Answer

A)  positive cash flow 
B)  negative cash flow 
C)  in money 
D)  positive cash source

Question 2

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.

Accepted Answer

A)  10 
B)  15 
C)  20 
D)  25

Question 3

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

Accepted Answer

The answer of Briefly describe each of the following depreciation...

Question 4

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 ____.

Accepted Answer

A)  similar 
B)  contradictory 
C)  error-generating 
D)  none of the above

Question 5

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

Accepted Answer

A)  pay the loan back 
B)  earn sufficient profits so that the loan can be paid back 
C)  depreciate an item 
D)  none of the above

Question 6

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

Accepted Answer

A)  an X plot 
B)  an XY Scatter 
C)  a Y plot 
D)  a pie chart

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

A)  simple 
B)  complex 
C)  compound 
D)  principal

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

IRR stands for the ____.

Accepted Answer

A)  internal rate of return 
B)  initial rate of return 
C)  interest rate of return 
D)  none of the above

Question 11

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

Accepted Answer

The answer of The correct function for the fixed-declining balance...

Question 12

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

Accepted Answer

A)  periods 
B)  life 
C)  number 
D)  sell

Question 13

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: ____.

Accepted Answer

A)  =SUM(C19,C21,C22) 
B)  =C19-C21+C22 
C)  =C19+C21-C22 
D)  =C19-C21-C22

Question 14

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

Accepted Answer

A)  added to 
B)  subtracted from 
C)  either a or b 
D)  neither a nor b

Question 15

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

Accepted Answer

The answer of The RATE function syntax is as follows:...

Question 16

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, ____.

Accepted Answer

A)  all cash flows must be positive 
B)  all cash flows must be negative 
C)  there must be at least one positive and one negative cash flow 
D)  it doesn't matter at all

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

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

Accepted Answer

A)  0 
B)  - 
C)  1 
D)  end

Question 20

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 ____.

Accepted Answer

A)  present value (pv) 
B)  payment (pmt) 
C)  present value (pv) and payment (pmt) 
D)  any of the above

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.

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]).

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 ____.