Chapter 9 quiz
The change in a firm's future cash flows that results from adding a new project are referred to as _____ cash flows.
incremental cash flow
A pro forma financial statement is a financial statement that:
projects future years' operations.
The analysis of the effect that a single variable has on the net present value of a project is called _____ analysis.
sensitivity
The assumption that a project will be evaluated based on its incremental cash flows is referred to as the:
stand-alone principle.
The options a firm has to expand into related business products are referred to as:
strategic options.
A U.S. depreciation system that allows for more rapid depreciation under various classifications is called:
the Accelerated Cost Recovery System.
The opportunity to modify a project in the future is referred to as:
? MarginalX
When a firm cannot raise financing for a project under any circumstances, the firm is facing a situation known as:
Hard rationing
The analysis of the effects that what-if questions have on the net present value of a project is called _____ analysis.
Scenario
The situation that exists when the units within a business are allotted a fixed amount of money for capital budgeting is referred to as:
Soft rationing
A sunk cost is:
a cost that has already been incurred and cannot be recouped
The most valuable alternative that is forfeited if a particular investment is undertaken is called:
an opportunity cost.
The situation a firm faces when it has positive net present value projects but cannot obtain financing for those projects is referred to as:
capital rationing.
The cash flows of a new project that result from a reduction in the cash flows from a firm's existing projects are called:
erosion