Financial Management: Core Concepts, Third Edition

Prepping for Exams

1.            is at the heart of corporate finance because it is concerned with making the best choices about project selection.

   1. Capital budgeting

   2. Capital structure

   3. Payback period

   4. Short-term budgeting

2. Consider the following four-year project. The initial after-tax outlay or after-tax cost is $1,000,000. The future after-tax cash inflows for years one, two, three, and four are $400,000, $300,000, $200,000, and $200,000, respectively. What is the payback period without discounting cash flows?

   1. 2.5 years

   2. 3.0 years

   3. 3.5 years

   4. 4.0 years

3. Which of the statements below is false?

   1. To account for the time value of money with the payback period model, you need to restate the future cash flow in current dollars.

   2. The discounted payback ...