BEC - 24

Question 1

Online analytical processing system

Answer 1

software technology that enables the user to query the system (retrieve data) and conduct an analysis

Question 2

Scenario Analysis

Answer 2

a technique that explores the effect of simultaneous changes in a group of variables

Question 3

Sensitivity Analysis

Answer 3

explores the importance of variables by manipulating variables one at a time to determine their importance to the forecast

Question 4

Decision Trees

Answer 4

a technique that recognizes the multiple decisions that are involved in implementing a project

Question 5

Real Options Technique

Answer 5

a technique that views an investment as a purchasing option

Question 6

Underlying assumption of NPV

Answer 6

NPV assumes that cash inflows from the investment project can be reinvested at the cost of capital

Question 7

Underlying assumption of IRR

Answer 7

IRR assumes that cash flows from each project can be reinvested at the IRR for that particular project.

This underlying assumption is considered to be a weakness of the IRR technique

Question 8

Committed costs

Answer 8

arise from a company’s basic commitment to open its doors and engage in business (depreciation, property taxes, management salaries)

Question 9

ROI Formula

Answer 9

Net Operating Profit / Invested Capital

Question 10

If a firm purchases raw materials from its supplier on a 2/10, net 40, cash discount basis, the equivalent annual interest rate (using a 360-day year) of forgoing the cash discount and making payment on the 40th day is

Answer 10

The buyer is receiving 2% of the face for paying the account 30 days before it is due. The formula to calculate the nominal rate is:

Nominal annual cost = 2% / (100-2%) x 360 days / (40 days - 10 days) = 24.49%

Question 11

What is the cost for not taking an early payment discount (AP trade credit)

Answer 11

Discount % / 100% - Discount % x 365 days / Total Pay Period - Discount Period