罗斯公司理财英文练习题附带答案第九章十一月整理

罗斯公司理财英文练习题附带答案第九章十
一月整理
CHAPTER 11
1
CHAPTER 9
Risk Analysis, Real Options, and Capital Budgeting
Multiple Choe Questions:
I. DEFINITIONS
SCENARIO ANALYSIS
b 1. An analysis of what hens to the estimate of the present value when you eamine a number of different likely situations is called
analysis. a. forecasting
b. scenario
c. sensitivity
d. simulation
e. break-even
Diffulty level: Easy
SENSITIVITY ANALYSIS
c 2. An analysis of what hens to the estimate of present value when only one variable is change
d is called
analysis. a. forecasting
b. scenario
c. sensitivity
d. simulation
e. break-even
Diffulty level: Easy
SIMULATION ANALYSIS
d 3. An analysis whh bines scenario analysis with
sensitivity analysis is called
analysis. a. forecasting
b. scenario
c. sensitivity
d. simulation
e. break-even
Diffulty level: Easy
BREAK-EVEN ANALYSIS
e 4. An analysis o
f the relationship between the sales volume and various measures of profitability is called
analysis. a. forecasting
b. scenario
c. sensitivity
d. simulation
e. break-even
Diffulty level: Easy
VARIABLE COSTS
a 5. Variable costs:
a. change in direct relationship to the quantity of output produced.
b. are constant in the short-run regardless of the quantity of output produced.
c. reflect the change in a variable when one more unit of output is produce
d. d. are subtracted from fied costs to pute the contribution marn.
e. form the basis that is
used to determine the degree of operating leverage employed by a firm.
Diffulty level: Easy
FIED COSTS
b 6. Fied costs:
a. change as the quantity of output produced changes.
b.
are constant over the short-run regardless of the quantity of output produced. c. reflect the change in a variable when one more unit of output is produced. d. are subtracted from sales to pute the contribution marn. e. can be ignored in scenario analysis since they are constant over the life of a project. Diffulty level: Easy ACCOUNTING BREAK-EVEN
c 7. The sales level that results in a project’s ine eactly equaling zero is calle
d the
break-even. a. operational
b. leveraged
c. accounting
d. cash
e. present value
Diffulty level: Easy
PRESENT VALUE BREAK-EVEN
e 8. The sales level that results in a project’s present value eactly equaling zero is called the
break-even. a. operational
b. leveraged
c. accounting
d. cash
e. present value
Diffulty level: Easy
II. CONCEPTS
SCENARIO ANALYSIS
b 9. Conducting scenario analysis helps managers see the:
a. impact of an individual variable on the oute of a project.
b. potential range of outes from a proposed project.
c.
changes in long-term debt over the course of a proposed project.
d. possible range of market pres for their stock over the life of a project.
e. allocation distribution of funds for capital projects under conditions of hard rationing. Diffulty level: Easy SENSITIVITY ANALYSIS
b 10. Sensitivity analysis helps you determine the:
a. range of possible outes ven possible ranges for every variable.
b. degree to whh the present value reacts to changes in a single variable.
c. present value ven the best and the worst possible situations.
d. degree to whh a project is reliant upon the fied costs.
e. level of variable costs in relation to the fied costs of a project. Diffulty level: Easy
SENSITIVITY ANALYSIS
c 11. As the degree of sensitivity of a project to a single variable rises, the:
a. lower the forecasting risk of the project.
b.
smaller the range of possible outes ven a pre-defined range of values for the
input. c. more attention management should place on accurately forecasting the future value of
that variable. d. lower the maimum potential value of the project. e. lower the maimum potential loss of the project.
Diffulty level: Medium
SENSITIVITY ANALYSIS
c 12. Sensitivity analysis is conducte
d by:
a. holding all variables at their base level and channg the required rate of return
assigned to a project. b. channg the value of two variables to determine their interdependency. c. channg the value of a single variable and puting the resulting change in the
current value of a project. d. assigning either the best or the worst possible value to each variable and paring the
results to those achieved by the base case. e. managers after a project has been implemented to determine how each variable relates to the level of output realized. Diffulty level: Medium
SENSITIVITY ANALYSIS
d 13. To ascertain whether th
e accuracy o
f the variable cost estimate for a project will have
much effect on the final oute of the project, you should probably conduct
analysis. a. leverage
b. scenario
c. break-even
d. sensitivity
e. cash flow
Diffulty level: Easy
SIMULATION
d 14. Simulation analysis is based on assigning a
and analyzing the results. a. narrow range of values to a single variable
b. narrow range of values to multiple variables simultaneously
c. wide range of values to a single variable
d. wide range of values to multiple variables simultaneously
e. single value to each of the variables
Diffulty level: Medium
SIMULATION
e 15. The type o
f analysis that is most dependent upon the use of a puter is
analysis. a. scenario
b. break-even
c. sensitivity
d. degree of operating leverage
e. simulation
Diffulty level: Easy
VARIABLE COSTS
d 16. Whh on
e o
f the follo
g is most likely a variable cost?
a. offe rent
b. property taes
c. property insurance
d. direct labor costs
e. management salaries
Diffulty level: Easy
VARIABLE COSTS
a 17. Whh of the follog statements concerning variable costs is (are) correct?
I. Variable costs minus fied costs equal marnal
II. Variable costs are equal to zero when production is equal to zero. III. An increase in variable costs increases the operating cash flow. a. II only
b. III only
c. I and III only
d. II and III only
e. I and II only
Diffulty level: Medium
VARIABLE COSTS
a 18. All else constant, as the variable cost per unit increases, the:
a. contribution marn decreases.
b. sensitivity to fied costs decreases.
c. degree of operating leverage decreases.
d.
operating cash flow increases. e. profit increases.
Diffulty level: Medium
FIED COSTS
c 19. Fie
d costs:
I. II. must be paid even if production is halted. III.
are generally affected by the amount of fied assets owned by a firm. IV. per unit remain constant over a ven range of production output. a. I and III only
b. II and IV only
c. I, II, and III only
d. I, II, and IV only
e. I, II, III, and IV
Diffulty level: Medium
CONTRIBUTION MARN
c 20. The contribution marn must increase as:
a. both the sales pre and variable cost per unit increase.
b. the fied cost per unit declines.
c. the gap between the sales pre and the variable cost per unit widens.
d. sales pre per unit declines.
e. the sales pre minus the fied cost per unit increases. Diffulty level: Medium
ACCOUNTING BREAK-EVEN
a 21. Whh of the follog statements are correct concerning the accounting break-even
point?
I. The ine is equal to zero at the accounting break-even point.
II. The present value is equal to zero at the accounting break-even point. III. The quantity sold at the accounting break-even point is equal to the total fied costs plus depreciation divided by the contribution marn. IV. The quantity sold at the accounting break-even point is equal to the total fied costs divided by the contribution marn. a. I and III only
b. I and IV only
c. II and III only
d. II and IV only
e. I, II, and IV only
Diffulty level: Medium
ACCOUNTING BREAK-EVEN
b 22. All else constant, the accounting break-even level of sales will decrease when the:
a. fied costs increase.
b. depreciation epense decreases.
c. contribution marn decreases.
d. variable costs per unit increas
e. e. selling pre per unit decreases. Diffulty level: Medium
PRESENT VALUE BREAK-EVEN
d 23. Th
e point where a project produces a rate o
f return equal to the required return is
known as the:
a. point of zero operating leverage.
b. internal break-even point.
c. accounting break-even point.
d. present value break-even point.
e. internal break-even point. Diffulty level: Easy
PRESENT VALUE BREAK-EVEN
b 24. Whh of the follog statements are correct concerning the present value break-even
point of a project?
I. The present value of the cash inflows equals the amount of the initial investment. II. The payback period of the project is equal to the life of the project. III. The operating cash flow is at a
level that produces a present value of zero. IV. The project never pays back on a discounted basis. a. I and II only
b. I and III only
c. II and IV only
d. III and IV only
e. I, III, and IV only
Diffulty level: Medium
INVESTMENT TIMING DECISION
b 25. The investment timing decision relates to:
a. how long the cash flows last once a project is implemented.
b. the decision as to when a project should be started.
c.
how frequently the cash flows of a project occur. d. how frequently the interest on the debt incurred to finance a project is
pounded. e. the decision to either finance a project over time or pay out the initial cost in cash. Diffulty level: Medium OPTION TO WAIT
e 26. The timing option that ves the option to wait:
I. may be of minimal value if the project relates to a rapidly cha
II. is partially dependent upon the discount rate lied to the project being evaluated. III. is defined as the situation where operations are shut down for a period of time. IV. has a value equal to the present value of the project if it is started today versus the present value if it is started at some later date. a. I and III only
b. II and IV only
c. I and II only
d. II, III, and IV only
e. I, II, and IV only
Diffulty level: Challenge
OPTION TO EPAND
b 27. Last month you introduced a new product to the market.Consumer demand has been
overwhelming and ears that strong demand will eist over the long-term.ven this
situation, management should consider the option to:
a. suspend.
b. epand.
c. abandon.
d.
contract. e. withdraw. Diffulty level: Easy
OPTION TO EPAND
c 28. Including the option to epan
d in your project analysis will tend to:
a. etend the duration of a project but not affect the
project’s present value. b. increase the cash flows of a project but decrease the project’s present value. c. increase the present value of a project. d. decrease the present value of a project. e. have no effect on either a project’s cash flows or
its present value. Diffulty level: Medium
SENSITIVITY AND SENARIO ANALYSIS
d 29. Theoretally, th
e NPV is the most ropriate method to determine the acceptability o
f a project. A false sense of security can be overwhelm the decision-maker when the procedure is lied properly and the positive NPV results are accepted blindly. Sensitivity and scenario analysis aid in the process by
a. channg the underlying assumptions on whh the decision is based.
b. highlights the areas where more and better data are needed.
c. providing a pture of how an event can affect the calculations.
d. All of the abov
e. e. None of the above.
Diffulty level: Medium
DECSION TREE
a 30. In order to make a decision with a decision tree
a. one starts farthest out in time to make the first decision.
b. one must ben at time 0.
c. any path can be taken to get to the en
d. d. any path can be taken to get back to the benning.
e. None of the above. Diffulty level: Medium
DECISION TREE
c 31. In a decision tree, the NPV to make the yes/no decision is dependent on
a. only the cash flows from successful path.
b. on the path where the probabilities add up to one.
c. all cash flows and
probabilities. d. only the cash flows and probabilities of the successful path. e. None of the above. Diffulty level: Medium DECISION TREE
e 32. In a decision tree, caution should be used in analysis because
a. early stage decisions are probably riskier and should not likely use the same discount rate.
b. if a negative NPV is actually occurring, management should opt out of the project and minimize their loss.
c. decision trees are only used for planning, not actually
daily management. d. Both A and C. e. Both A and B.
Diffulty level: Medium
SENSITIVITY ANALYSIS
d 33. Sensitivity analysis evaluates th
e NPV with respect to
a. changes in the underlying assumptions.
b. one variable channg while holding the others constant.
c. different econom conditions.
d. All of the abov
e. e. None of the above.
Diffulty level: Medium
SENSITIVITY ANALYSIS
d 34. Sensitivity analysis provides information on
a. whether the NPV should be trusted, it may provide a false sense of security if all NPVs are positive.
b. the need for additional information as it tests each variable in isolation.
c.
the degree of diffulty in channg multiple variables together.
d. Both A and B.
e. Both A and C. Diffulty level: Medium
FIED COSTS
b 35. Fied production costs are
a. directly related to labor costs.
b. measured as cost per unit of time.
c. measured as cost per unit of output.
d.
dependent on the amount of goods or serves produced. e. None of the above. Diffulty level: Medium
VARIABLE COSTS
d 36. Variabl
e costs
a. change as the quantity of output changes.
b. are zero when production is zero.
c. are eemplified by direct labor and raw materials.
d. All of the abov
e. e. None of the above.
Diffulty level: Easy
SENSITIVITY ANALYSIS
b 37. An investigation of the degree to whh NPV depends on assumptions made about any singular crital variable is called a(n)
a. operating analysis.
b. sensitivity analysis.
c.
marnal benefit analysis. d. decision tree analysis. e.
None of the above. Diffulty level: Easy
SENSITIVITY AND SCENARIOS ANALYSIS
b 38. Scenario analysis is different than sensitivity analysis
a. as no econom forecasts are changed.
b. as several variables are changed together.
c. because scenario analysis deals with actual data versus sensitivity analysis whh deals with a forecast.
d. because it is short and simpl
e. e. because it is #;by the seat of the pants#; technique. Diffulty level: Medium EQUIVALENT ANNUAL COST
c 39. In the present-value break-even the EAC is use
d to
a. determine the opportunity cost of investment.
b.
allocate depreciation over the life of the project. c.
allocate the initial investment at its opportunity cost over the life of the project. d. determine the contribution marn to fied costs. e. None of the above. Diffulty level: Medium BREAK-EVEN
b 40. The present value break-even point is superior to the accounting break-even point because
a. present value break-even is more plated to calculate.
b.
present value break-even covers the econom opportunity costs of the investment. c. present value break-even is the same as sensitivity analysis. d. present value break-even covers the fied costs of production, whh the accounting break-even does not. e.
present value break-even covers the variable costs of production, whh the accounting break-even does not. Diffulty level: Easy ABANDONMENT
d 41. Th
e potential decision to abandon a project has option value because
a. abandonment can occur at any future point in time.
b.
a project may be worth more dead than alive. c. management is not locked into a negative oute. d. All of the above. e. None of the above. Diffulty level: Easy
TYPES OF BREAK-EVEN ANALYSIS
d 42. Whh of th
e follog are types o
f break-even analysis?
a. present value break-even
b. accounting profit break-even
c. market value break-even
d. Both A and B.
e. Both A and C. Diffulty level: Easy
MONTE CARLO SIMULATION
c 43. The roach that further attempts to model real wor
d uncertainty by analyzing projects th
e way one might analyze gambling stratees is called
a. gamblers roach.
b. blackjack roach.
c. Monte Carlo simulation.
d. scenario analysis.
e. sensitivity analysis.
Diffulty level: Medium
MONTE CARLO
c 44. Monte Carlo simulation is
a. the most widely used by eecutives.
b. a very simple formula.
c. provides a more plete analysis that sensitivity or scenario.
d. the oldest capital budgeting techniqu
e. e. None of the above. Diffulty level: Easy
OPTIONS IN CAPITAL BUDGETING
d 45. Whh of th
e follog are hidden options in capital budgeting?
a. option to epand.
b. timing option.
c. option to abandon.
d. All of the abov
e. e. None of the above.
Diffulty level: Easy
III. PROBLEMS
Use this information to answer questions 46 through 50.
The Adept Co.is analyzing a proposed project.The pany epects to sell 2,500
units, ve or take 10 percent.The epected variable cost per unit is $8 and the epected fied costs are $12,500.Cost estimates are considered accurate within a plus or minus 5 percent range.The depreciation epense is $4,000.The sale pre is estimated at $16 a unit, ve or take 2 percent.The pany bases their sensitivity analysis on the epected case scenario.SCENARIO ANALYSIS
d 46. What is th
e sales revenue under the optimist case scenario?
a. $40,000
b. $43,120
c. $44,000
d. $44,880
e. $48,400
Diffulty level: Medium
SCENARIO ANALYSIS
d 47. What is th
e contribution marn under the epected case scenario?
a. $2.67
b. $3.00
c. $7.92
d. $8.00
e. $8.72
Diffulty level: Medium
SCENARIO ANALYSIS
c 48. What is the amount of the fie
d cost per unit under th
e pessimist case scenario?
a. $4.55
b. $5.00
c. $5.83
d. $6.02
e. $6.55
Diffulty level: Medium
SENSITIVITY ANALYSIS
b 49. The pany is conducting a sensitivity analysis on the sales pre using a sales
pre estimate of $ing this value, the earnings before interest and taes will be:
a. $4,000
b. $6,000
c. $8,500
d. $10,000
e. $18,500
Diffulty level: Medium
SENSITIVITY ANALYSIS
b 50. The pany conducts a sensitivity analysis using a variable cost of $9.The total
variable cost estimate will be:
a. $21,375
b. $22,500
c. $23,625
d. $24,125
e. $24,750
Diffulty level: Medium
Use this information to answer questions 51 through 55.
The Can-Do Co.is analyzing a proposed project.The pany epects to sell 12,000
units, ve or take 4 percent.The epected variable cost per unit is $7 and the epected fied cost is $36,000.The fied and variable cost estimates are considered accurate within a plus or minus 6 percent range.The depreciation epense is $30,000.The ta rate is 34 percent.The sale pre is estimated at $14 a unit, ve or take 5 percent.The pany bases
their sensitivity analysis on the epected case scenario.SCENARIO ANALYSIS
a 51. What is the earnings before interest and taes under the epected case scenario?
a. $18,000
b. $24,000
c. $36,000
d. $48,000
e. $54,000
Diffulty level: Medium
SCENARIO ANALYSIS
c 52. What is the earnings before interest an
d taes under anoptimist cas
e scenario?
a. $22,694.40
b. $24,854.40
c. $37,497.60
d. $52,694.40
e. $67,947.60
Diffulty level: Challenge
SCENARIO ANALYSIS
b 53. What is the earnings before interest and taes under the pessimist case scenario?
a. -$566.02
b. -$422.40
c. -$278.78
d. $3,554.50
e. $5,385.60
Diffulty level: Challenge
SENSITIVITY ANALYSIS
d 54. What is th
e operating cash flow for a sensitivity analysis using total fied costs of
$32,000?
a. $14,520
b. $16,520
c. $22,000
d. $44,520
e. $52,000
Diffulty level: Medium
SENSITIVITY ANALYSIS
d 55. What is th
e contribution marn for a sensitivity analysis using a variable cost per unit o
f $8?
a. $3
b. $4
c. $5
d. $6
e. $7
Diffulty level:。