Name, Surname, Index number……………………………………………………………………………..

1. Which of the following statements is true?

1. WACC is calculated on after-tax basis.

2. In WACC calculation analyst use expected financing costs.

3. There is no financial cost of retained earnings.

4. Both A and B are true.

5. Both A and C are true.

1. Projects A and B are conventional and mutually exclusive. Project A has greater NPV if WACC is less than 10% and project B has greater NPV if the WACC is more than 10%. Which of the following statements are true?

1. One should accept project B,

2. Project B has greater IRR,

3. Early cash flows are bigger in the case of project A,

4. Project A has sorter discounted playback period,

1. Solaria ltd suppose to choose between two different machines. The cash flows are presented in the table below.

Rok	0	1	2	3	4
Maszyna A	-40.000	0	0	0	77.520
Maszyna B	-40.000	16.680	16.680	16.680	16.680

If the discount rate is 10%, which of the following statements are true?

1. NPV_A > NPV_B by 73, therefore A is more attractive,

2. NPV_A < NPV_B by 5.880, therefore B is more attractive,

3. NPV_A > NPV_B o 5.880, therefore A is more attractive,

4. IRR_A > IRR_B, therefore A is more attractive,

5. IRR_A < IRR_B, therefore A is more attractive.

1. Which of the following is the component of NWC:

   1. Inventories

   2. Receivables

   3. Marketable securities

   4. Depreciation charge

2. The main objective of financial management is to:

   1. Maximize profits

   2. Maximize EBITDA

   3. Maximize shareholder’s wealth

   4. Maximize liquiudity.

3. Net present value:

   1. is equal to the initial investment in a project

   2. is a dollar comparison of a project's cost to the present value of the project's benefits

   3. is equal to zero when the discount rate applied is less than the internal rate of return (IRR).

   4. is simplified by the fact that the discount rate applicable to an individual project is easy to determine.

   5. requires a firm to set an arbitrary cutoff point in time for determining whether or not a project should be accepted.

4. Brett is deciding whether or not to drop one of the college courses in which he is currently enrolled. If he drops the course, he will forfeit half of the money spent on tuition. However, by dropping the course, he can increase the number of hours he works each week. Which of the following statements is accurate based on Brett's situation?
   I. Remaining in the class incurs an opportunity cost equal to Brett's foregone wages.
   II. The tuition is irrelevant to the decision because it is a sunk cost.
   III. The time and energy put into the course thus far is a sunk cost.

1. I only

2. I and II only

3. I and III only

4. II and III only

5. I, II, III

1. Boyd and Sons purchased 14.5 ha of industrial property 2 years ago at a cost of 1.1 million. Since that time, the firm has spent 220,000 on land improvements such that the current market value of the land is estimated at 1.45 million. The operations manager has been assigned the task of analyzing the construction of a new manufacturing plant located on that site. This manager has developed cost estimates for the building and its contents of 24.6 million along with 1.1 million for additional land improvements and site preparation. Based on this information, the financial manager should estimate the initial cash flow for the plant project as _____ million.

1. 25.7

2. 25.92

3. 26.05

4. 27.02

5. 27.15

1. Which of the following investment rules may not use all possible cash flows in its calculations? 
   a) NPV

2. Payback period

3. IRR

4. All of the above

10. Project Y has following cash flows: C₀ = -800; C₁ = +5,000; C₂ = -5,000; Calculate the IRRs for the project: 

1. 5% & 400%

2. 125% & 500%

3.  -44% & 11.6%

4.  None of the above

11. Two mutually exclusive projects have the following NPVs and project lives.
    
    If the cost of capital is 15%, which project would you accept? 
    a) A
    b) B
    c) Both A and B
    d) Reject both A and B

1. Discuss the difficulties concerning the capital rationing decisions under capital rationing.

2. Calculate the financial and operational break-even for company A and B. How would you assess the difference between companies?

1. The financial director of a company makes the following comments: ‘‘The company performed remarkably well this year. You be the judge – our depreciation policy enabled us to generate 50% more EBITDA than last year. Our working capital has increased sharply, due to a more generous customer credit policy (3 months instead of 2) and to a significant increase in our inventories.’’ What is your response? What advice would you give?

1. Discuss the difficulties concerning using rates of returns in capital budgeting decisions.

2. The operating details for Spalton plc are as follows:

• permanent working capital equal to 25% of sales;

• sales rise from 100 million to 120 million in year 2;

• EBITDA rises to 15% of sales in year 2.

• Depreciation in year 2 is 10 mil.

• Interests in year 2 are 5 mil.

Calculate operating part of the free cash flow in year 2.

1. If income is recorded on a company’s books on the day it is received (and not on the invoice date) and costs on the date of payment, would this generate working capital? If so, how would this working capital differ from the working capital as calculated today?