Description

This is NOT an essay. Please complete the quiz questions listed below. Most questions are open ended and there are a few multiple choice. I have attached a word document to be used for your convenience No references are needed. However, I have included a list of the text resources that should be used to find the answers.

1. What expectation should a company have regarding receivables from a customer who has entered bankruptcy proceedings?
2. What is political risk, and how can a firm minimize political risk?
3. How are inventory days calculated for purposes of the cash conversion cycle?
   a. Inventory – average daily cost of goods sold
   b. Inventory / average daily cost of goods sold
   c. Inventory x average daily cost of goods sold
   d. Inventory / accounts receivable.
4. How is the initial investment in a capital expenditure calculated? How are sunk costs treated in calculating an initial investment?
5. What costs are involved with inventory other than stock-out and opportunity costs? Briefly explain each.
6. In which way would a firm decide if it should use the 2/10, Net 30 discount offered by a supplier?
   a. Calculating the difference between 2% as offered by the supplier and the interest rate on a loan the firm would need in order to take the 2% discount
   b. Calculating the discount as annual interest rate on a loan and comparing that rate to the interest rate on a loan the firm could take out to take the 2% discount
   c. Dividing the 2% discount offered by the supplier by the discount the firm offers its own customers and taking the supplier discount if the result is negative
   d. Dividing the 2% discount offered by the supplier by the discount the firm offers its own customers and taking the supplier discount if the result is positive
7. What basis is used to measure the benefits a firm receives from a capital expenditure?
8. If a firm has unlimited funds, what decisions should it make regarding independent projects?
9. Define “opportunity costs” in the context of capital budgeting decisions. Why are opportunity costs considered in capital budgeting? How are opportunity costs treated in capital budgeting?
10. Farmland Industries manufactures and sells farm tractors. Farmland’s primary supplier of materials (engines) offers trade credit terms of 2%/10, Net 30. Farmland generally chooses to forego the 2% discount. On what day should Farmland pay its supplier to be on time with the payment? Why? What is the advantage to Farmland to choose to forego a discount offered by a supplier?
11. In ranking projects, such as when a firm utilizes capital rationing, there is a conflict between rankings based on net present value and internal rate of return. What is the assumption about reinvesting intermediate cash flows and internal rate of return?
12. Why would a firm offer trade credit terms, such as of 2%/10, Net 30 to a customer?
13. Explain the difference between independent projects and mutually exclusive projects in capital budgeting. Provide an example of each.
14. At what point in time do operating cash flows occur?
    a. At time zero
    b. At the end of a project
    c. During the life of a project
    d. During the first year of a project
15. How is the initial investment cash flow determined?
16. What are fixed overhead expenses and how are fixed overhead expenses treated in capital budgeting?

APA format and references not needed at this time. However, I have listed the text resources from the class and topics below:

1. Berk, Corporate Finance, Pearson eText, 3/e
2. Foerster, Financial Management: Concepts and Applications, Pearson eText, 1/e
3. Gitman, Principles of Managerial Finance, Pearson eText, 14/e
4. Miller-Nobles, Horngren’s Accounting, Pearson eTe