Financial Management - Study Mode
[#541] Relevant cash flow which company expects when its will implement project is classified as
Correct Answer
(C) incremental cash flow
Explanation
Solution: Relevant cash flow which company expects when its will implement project is classified as incremental cash flow. Incremental cash flow is the additional operating cash flow that an organization receives from taking on a new project. A positive incremental cash flow means that the company's cash flow will increase with the acceptance of the project.
[#542] Free cash flow is Rs 12000, an operating cash flow is Rs 4000, an investment outlay cash flow is Rs 5000 then salvage cash flow would be
Correct Answer
(D) Rs 3,000.00
Explanation
Solution: Salvage Cash flow = Free cash flow - Operating cash flow - Investment outlay cash flow = 12000 - 4000 - 5000 = Rs. 3000.
[#543] Cash flows that should be considered for decision in hand are classified as
Correct Answer
(A) relevant cash flows
Explanation
Solution: Cash flows that should be considered for decision in hand are classified as relevant cash flows. It states that they must be cash flows that occur in the future and are incremental. While on the face of it obvious, only costs or revenues that give rise to a cash flow should be included.
[#544] Nominal interest rates and nominal cash flows are usually reflected the
Correct Answer
(A) inflation effects
Explanation
Solution: Nominal interest rates and nominal cash flows are usually reflected the inflation effects. Inflation has the following effects on production activities: Inflation may or may not result in an increase in production. As long as the economy does not reach the full employment stage, inflation has a favorable effect on production. Usually, as the price level increases, profits increase too.
[#545] In binomial approach of option pricing model, fourth step is to create
Correct Answer
(C) riskless investment
Explanation
Solution: In binomial approach of option pricing model, fourth step is to create riskless investment. An investment with a certain rate of return and no chance of default.