Answer True False A sunk cost is any cost that must be expended in order to comp

Question

Answer True
False

A sunk cost is any cost that must be expended in order to complete a project and bring it into operation. A sunk cost is any cost that was expended in the past but can be recovered if the firm decides not to go forward with the project. A sunk cost is a cost that was incurred and expensed in the past and cannot be recovered if the firm decides not to go forward with the project. Sunk costs were formerly hard to deal with, but once the NPV method came into wide use, it became possible to simply include sunk costs in the cash flows and then calculate the PV. A good example of a sunk cost is a situation where Home Depot opens a new store, and that leads to a decline in sales of one of the firm

Explanation / Answer

true

2)A sunk cost is a cost that was incurred and expensed in the past and cannot be recovered if the firm decides not to go forward with the project.

3)Political risk should be excluded from multinational corporate financial analyses.

4)The yen-dollar exchange rate in the 90-day forward market equals the yen-dollar exchange rate in the 180-day forward market.

5)1.4153

6)false

7) 1.9608

8)true

9)0.5263

10)The investment in working capital required to operate the project, even if that investment will be recovered at the end of the projects life.

11)145.2384

12)true

13)27252

14)1.2588

15)Foreign bonds and Eurobonds are two important types of international bonds.

16)true

17)9955

18)5872

19)Since depreciation is not a cash expense, it has no effect on cash flows and thus no effect on capital budgeting decisions.

Under accelerated depreciation, higher depreciation charges occur in the early years, and this reduces the early cash flows and thus lowers a project's projected NPV

20)false

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