Questions from Financial Management

Q: Why do we focus on cash flows instead of profits when evaluating

Why do we focus on cash flows instead of profits when evaluating proposed capital budgeting projects?

Q: What is a sunk cost? Is it relevant when evaluating a

What is a sunk cost? Is it relevant when evaluating a proposed capital budgeting project? Explain.

Q: What are the characteristics of an efficient market?

What are the characteristics of an efficient market?

Q: How do we estimate expected incremental cash flows for a proposed capital

How do we estimate expected incremental cash flows for a proposed capital budgeting project?

Q: What role does depreciation play in estimating incremental cash flows?

What role does depreciation play in estimating incremental cash flows?

Q: How financing costs are generally incorporated into the capital budgeting analysis process

How financing costs are generally incorporated into the capital budgeting analysis process?

Q: Describe the general pattern of cash flows from a bond with a

Describe the general pattern of cash flows from a bond with a positive coupon rate.

Q: All other things held constant, how would the market price of

All other things held constant, how would the market price of a bond be affected if coupon interest payments were made semiannually instead of annually?

Q: Why is the replacement value of assets method not generally used to

Why is the replacement value of assets method not generally used to value complete businesses?

Q: Does high operating leverage always mean high business risk? Explain.

Does high operating leverage always mean high business risk? Explain.