Questions from Financial Management

Q: New investments often require that the firm invest additional money in working

New investments often require that the firm invest additional money in working capital. Give some examples of what this means.

Q: When a firm finances a new investment, it often borrows part

When a firm finances a new investment, it often borrows part of the money, so the interest and principal payments this creates are incremental to the project’s acceptance. Why are these expenditures n...

Q: Discuss how free cash flow differs from a firm’s operating cash flow

Discuss how free cash flow differs from a firm’s operating cash flow.

Q: If depreciation is not a cash flow item, why does it

If depreciation is not a cash flow item, why does it affect the level of cash flows from a project?

Q: Describe net operating working capital, and explain how changes in this

Describe net operating working capital, and explain how changes in this quantity affect an investment proposal’s cash flows.

Q: What are sunk costs, and how should they be considered when

What are sunk costs, and how should they be considered when evaluating an investment’s cash flows?

Q: Regardless of Your Major: Project Risk for Entrepreneurs on page 410

Regardless of Your Major: Project Risk for Entrepreneurs on page 410 discussed the risks that entrepreneurs face, with about 40 percent of new businesses shutting their doors during their first year....

Q: What is the objective of project risk analysis, and why is

What is the objective of project risk analysis, and why is it critical to the investment decision-making process?

Q: How do you perform a sensitivity analysis of an investment proposal,

How do you perform a sensitivity analysis of an investment proposal, and what is its purpose? Contrast the use of scenario analysis with that of simulation analysis.

Q: OTR Trucking runs a fleet of long-haul trucks and has

OTR Trucking runs a fleet of long-haul trucks and has recently expanded into the Midwest, where it has decided to build a maintenance facility. This project will require an initial cash outlay of $20...