When performing capital budgeting and considering replacement projects, one factor that must be considered is the potential __________ of equipment that is no longer needed.

a) taxation

• b) salvage value
• c) sunk costs
• d) depreciation

Select one disadvantage of IRR as a capital budget method.

• a) It is not useful for comparing projects with different lifespans.
• b) It can only be used with projects that have positive cash flows.
• c) It can be difficult to interpret and understand.
• d) It fails to account for the time value of money.

With respect to payroll disbursements, one way a company can manage their cash more efficiently is to __________.

• a) limit outsourcing
• b) implement check kiting
• c) increase float time
• d) use lockbox banking

Which of the following is an example of a market risk for a company that manufactures automobiles?

• a) A downgrade in the company's credit rating
• b) Supply chain disruptions due to civil war in a country that supplies material
• c) A massive lawsuit against the manufacturer over worker safety
• d) A drop in demand due to the rise of ride-sharing as an alternative to automobile ownership

Consider the following data from a company's 95-day operating cycle:

• Payable days: 8
• Receivable days: 25
• Inventory days: 70

What is the cash conversion cycle for this company?

• a) 87
• b) 103
• c) 47
• d) 53

Farrah owns 500 shares of stock valued at $30/share in Company A.

After the company issues a 3% stock dividend, what does Farrah own?

• a) 500 shares valued at $30.90/share
• b) 515 shares valued at $30/share
• c) 500 shares valued at $30/share
• d) 515 shares valued at $29.13/share