Fin301

A perpetuity is defined as:

unending equal payments paid at equal time intervals.

Bybee Printing makes custom posters and is currently considering making large-scale outdoor banners as well. Which one of the following is the best example of an incremental operating cash flow related to the banner project?

Hiring additional employees to handle the increased workload should the firm accept the banner project

An ordinary annuity is best defined as:

equal payments paid at the end of regular intervals over a stated time period.

Which one of the following compounding periods will yield the lowest effective annual rate given a stated future value at Year 5 and an annual percentage rate of 10 percent?

Annual

The stand-alone principle advocates that project analysis should be based solely on which one of the following costs?

Incremental

Which one of the following best illustrates erosion as it relates to a snack stand located on the beach?

Selling fewer cookies because ice cream was added to the menu

A furniture store is considering adding kitchen appliances to its offerings. Which one of the following is the best example of an incremental cash flow related to the appliances?

Selling furniture to appliance customers

The fact that a proposed project is analyzed based on the project's incremental cash flows is the assumption behind which one of the following principles?

Stand-alone principle

Cerda Diagnostics spent $5,000 last week repairing equipment. This week the company is trying to decide whether the equipment could be better utilized by assigning it to a proposed project. When analyzing the proposed project, the $5,000 should be treated as which type of cost?

Sunk

Which one of the following statements related to loan interest rates is correct?

When comparing loans you should compare the effective annual rates.

Your credit card charges you .85 percent interest per month. This rate when multiplied by 12 is called the ____ rate.

annual percentage

A project's cash flow is equal to the project's operating cash flow:

minus both the project's change in net working capital and capital spending.