Quiz Ch 06 – Representation of Net Working Capital
Principles of Corporate Finance
Brealey, Myers, and Allen
13th Edition
What is the most accurate representation of net working capital?
What is the most accurate representation of net working capital?
Why is it important to include net working capital (NWC) in project cash flows?
True or false: The equivalent annual cash-flow technique is mainly employed when comparing projects with identical durations.
True or false: Estimating project cash flows often encounter errors, with working capital being one of the most prevalent sources.
True or false: The MACRS system assigns most industrial equipment to the 10-15 year classes for depreciation.
True or false: Large U.S. corporations commonly employ two separate accounting records—one for stockholders and another for the Internal Revenue Service.
True or false: Utilizing the equivalent annual cash-flow approach, a financial analyst can evaluate the viability of replacing an existing machine with a new one and identify the most favorable timing for the replacement.
True or false: When comparing projects with positive NPV but different durations, the equivalent annual cash-flow approach is the suitable evaluation method.
True or false: Including working capital in cash-flow estimates is essential for accommodating additional investments within a project.
True or false: The decision to replace a machine becomes favorable when the Equivalent Annual Cost (EAC) of continued operation surpasses the EAC of the new machine.