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FIN 575 Final Exam

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FIN 575 Final Exam (Latest Version)

1. During the project initiation, a project charter is created. The
project charter should include which of the following?

Project manager’s expenses
Analysis of budget
Selection of the senior project manager
Projects high-level deliverables

2. A project's budget should be based on a company’s
Strategy and financial goals
Profitability
Financial goals and equity

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Debt load and equity

3. Earned value management is a technique used to integrate
projects

Resources
Scope, schedule, and resources
Schedule, costs, and benefits
Costs and profits

4. Bill’s Billiards has total assets of $8 million and a total asset
turnover of 2.9 times. If the return on assets is 11%, what is
Bill's profit margin?

11%
4.10%
2.50%
3.79%

5. What are the acceptance criteria for NPV?

If the NPV is less than $0, accept the project.
If the NPV is greater than $0, accept the project.

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If the IRR is equal to 0%, reject the project.
If the NPV is equal to the discounted payback, accept the
project.

6. The risk response plan answers what question?

What can be done if risk occurs? What is the backup plan?
What are project costs?
There is no need to plan for risk seldom occurs in a project.
How risk is to be managed

7. For the most recent year, Cal’s Cats had sales of $380,000,
cost of goods sold of $93,000, depreciation expense of $47,000,
and additions to retained earnings of $61,420. The firm had
$52,000 in interest expense, and 34% tax rate. What were the
times interest earned ratio?

2.2
5.8
4.61
2.8

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8.Bob’s Garages has sales of $41 million, total assets of $32
million, and total debt of $11 million. If the profit margin is 12%
what is the return on equity (ROE)?

14%
12%
51%
23.40%

9. What are the components of project planning that need
monitoring?

Resource procurement and quality
Project cost and risk
Project cost, risk, resource procurement and quality
Quality and control

10. During project planning, the project team creates a work
breakdown structure that details work tasks that must be
completed. The work breakdown structure should include a

Schedule of when every task will start and be completed

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Schedule of project staff meetings
Set of management tasks
Budget analysis

11. The R. M. Senchack Corporation earned an operating profit
margin of 6% based on sales of $11 million and total assets of
$6 million last year. What was Senchack’s total asset turnover
ratio?

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0.54
5.4
1.8

12. Why is the communication plan a crucial factor in project
success?

Ensures the timely generation, collection, storage, and
disposition of project information

Facilitates upper management communication with the
workers

Reduces rumors in the organization

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Communicates the economic value of the project to
management

13.A company’s assets are financed with

Debt
Equity
Equity or debt
Equity and debt

14. Part of financial planning for projects involves the
understanding of the inflows and outflows of cash that will be
created by the project. What tool can be used to track these cash
flows?

A NPV flow sheet
Profitability work sheet.
Project cash flow worksheet
Cash flow table

15.Stokes, Inc. has net working capital of $7,900, current
liabilities of $5,220, and inventory of $2,000. What is the quick
ratio?

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1.89
1.13
1.21
2.1

16. What ratio measures a firm’s degree of indebtedness?

Debt ratio
Quick ratio
Fixed coverage ratio
Times interest earned ratio

17. Which one of these terms is a type of debt financing?

Stock repurchases plans
Collateral
Trade credit
Bearer bonds

18.The sum of the percentage of equity and debt multiplied by
their respective cost is called

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Weighted average cost of capital
Capital asset pricing model
Market value added
Economic value added.

19. Profitability ratios all have what same figure in the
numerator?

Book value per
Net income
Price per share
Total assets

20. Terry’s Trash removal has a total debt ratio of 0.45. What is
the firm’s debt-to-equity ratio?

1.27
0.41
0.82
1.82

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21. An investment in a project should be undertaken only if the
expected return is greater than the

NPV
WACC
Payback method
Economic value added

22. Brenda Smith, Inc. had a gross profit margin (gross profits ÷
sales) of 25% and sales of $9.75 million last year. Seventy-five
percent of the firm’s sales are on credit and the remainder are
cash sales. Smith’s current assets equal $1,550,000, its current
liabilities equal $300,000, and it has $150,000 in cash plus
marketable securities. If Smith’s accounts receivable are
$562,500, what is its average collection period?

25 days
32 days
28 days
14 days

23.You are considering a project with an initial cash outlay of
$160,000 and expected free cash flows of $40,000 at the end of

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each year for 6 years. The required rate of return for this project
is 10%. What is the project’s payback period?

4 years
4.5 years
6 years
5 years

24. Project managers manage project cost by

Monitoring inventory costs
Monitoring opportunity costs
Ensuring the work is progressing as planned
Ensuring retail costs are controlled

25. What is the primary weakness commonly associated with the
use of the payback method to evaluate a proposed investment?

This approach fails to take into account the time factor in the
time value of money.

The payback method uses the discounted cash flow process.

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The payback method is able to recognize cash flows that
occur after the payback period.

The payback method is not appropriate for evaluating small
projects.

26. Fijisawa, Inc. is considering a major expansion of its product
line and has estimated the following free cash flows associated
with such an expansion. The initial outlay associated with the
expansion would be $1,950,000, and the project would generate
free cash flows of $450,000 per year for 6 years. The
appropriate required rate of return is 9%. Calculate the net
present value and the internal rate of return.

NPV=$66,098, IRR=10.5
NPV=$72,097, IRR=9.5
NPV=$68,663, IRR=10.2
NPV=$69,368, IRR=10

27. Cost normally falls into the domain of managerial
accounting and has 4 essential proposes. Select the answer that
is an essential function of cost.

Used to calculate earned value cost
Used to calculate executive stock options

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Used to calculate inventory costs
Used for planning future activities or budgets

28. Select the answer that is an example of a cost classification?

Credit cost
Fixed cost
Retail cost
Inventory cost

29. What are the four secondary processes in project control?

Schedule control, change control, risk control, and quality
assurance control

Value control, Inventory control, schedule control and quality
control

Organizational control, cost control, inventory control, and
risk control

Stakeholder control, organization control, risk control, and
change control
30. Stokes, Inc. has net working capital of $7,900, current
liabilities of $5,220, and inventory of $2,000. What is the
current ratio?

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2.1
0.77
1.89
1.51

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