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