IEECONO (Quiz 3)

Question 1

When Market Value > Book Value, then it is a ______________ .

Answer 1

Capital Gain

Question 2

When Market Value < Book Value, then it is a ______________ .

Answer 2

Capital Loss

Question 3

If the Market Value - Book Value results in a Capital Gain, the Capital Gain/Loss Tax would be ___________ .

Answer 3

Negative

Question 4

If the Market Value - Book Value results in a Capital Loss, the Capital Gain/Loss Tax would be ___________ .

Answer 4

Positive (Tax Benefit)

Question 5

In sensitivity analysis (dealing with uncertainty), the slope is determined by the formula : ___________ .

Answer 5

Change in Independent Variable / Level of Change

wherein the change in independent variable refers to the difference of one level to another and level of change refers to the percentage (ex. 40%, 30%, etc.)

Question 6

Formula for Breakeven Analysis

Answer 6

Fixed Costs / (Price - Variable Costs)

Question 7

As the percentage of the Initial Investment increases, the NPV __________.

Answer 7

Decreases.

Question 8

As the percentage of the Annual CF increases, the NPV __________.

Answer 8

Increases

Question 9

As the percentage of the Salvage Value increases, the NPV ___________.

Answer 9

Increases

Question 10

As the percentage of the Useful Life increases, the NPV ___________.

Answer 10

Increases

Question 11

In Inflation, for Actual Pesos, use ________________ for computation.

Answer 11

Combined MARR

Question 12

In Inflation, for Real Pesos, use _________

Answer 12

Real Interest Rate

Question 13

When using the following formula: z = x-u/ sd, the result will be the _____________.

Answer 13

Probability of NPV <= 0

Question 14

When using the following formula: z = x-u/ sd, in order to get the probability of NPV > 0, you must _________.

Answer 14

1-P(value)