MGMT 211 $801 F2017 Business Pinance-FINAL a The regular paybuck method secogine
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Question
MGMT 211 $801 F2017 Business Pinance-FINAL a The regular paybuck method secogines all cath s over s peoject's lide b The discounted payhack method rongnnes cash var a peoject's lifie, and it also adjusts these cash flows to account for the sime value of moncy even calculate the payhuck soday managers an idea of how long it will take to mower finds meted in a c The regular payback method was widely used years ap bt visally no companies d The regular payhack is aseful as an indicator of a peoject's ligidity because is pives et. 17. Which of the following statemonts hest describes a sankco? a. Aunk cot is any cost th= munt te expended i, onlertocomplete a proper and bring it inso opcration b Asunk cost is any cod that was espenled i·the pug berecovered ifthe c. Asunk cost is a cost that was incurred and penod poland cannot be d A sunk cost is any cot not diroctly relatod to the physical work requined to complete finn decoles sot to go forward with the rocovered if the firm decides not to po forward with the pejct the project. 18. Which of the following statcments best describes CCA? a. Using CCA method rather than straighi-line depreciation would nomally have no would effect on a project's acul proyected cash flows hut cash flows and thus the NPV atthe timangofthe b Corporations must use the same depreciation method (e g. straighe-line or CCA) for c. Since CCA deduction is not a cash expense, it has no effiect on cash lows and thus d Under CCA rules, higher CCA deductions occur in the early years, and this reduces stockholder reporting and tax purposes no effect on capital budpeting decisions the carly cash flows and thus lowers a project's projected NPVExplanation / Answer
16.
The payback period is the length of time required to recover the cost of an investment. Payback period is easy to calculate method for capital budgeting.The regular payback period is useful as indicator of a project’s liquidity because it gives manager the idea of how long it will take to recover the fund invested in project. Demerit of this method is It does not consider cash flow flows after payback period.
Option (D) is correct answer.
17.
Sunk cost is type of cost that has already spend and there is not any chance of recover. So, sunk cost is a cost that was incurred and expensed in past and cannot be recovered if the firm decide not to go forward with project.
Option (C) is correct answer.
18.
Using CCA method rather than straight-line depreciation would normally have no effecton a project’s total projected cash flows but it would affect the timing of the cash flowsand thus the NPV.
Option (A) is correct answer.
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