What are the three basic patterns of cash flow? Choose one to define and explain how to calculate the future and present value of the cash flow that you select. | Homework.Study.com (2024)

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• Fill in the blank: ___ is a discounted cash flow approach to capital budgeting that computes the present value of all future cash flows.
• Calculate the project cash flow generated for Project A and Project B using the NPV method. . Which project would you select, and why? . Which project would you select under the payback method? The di
• A building with a book value of $36,690 is sold for $60,547 cash. Using the indirect method, choose how this transaction should be shown on the statement of cash flows.
• The following is the set of cash flow: A single $300 cash inflow at the end of year 5. Determine the present value of cash flows using a discount rate of 10%.
• Calculate the future value of the single cash flow deposited today that will
• Which of the following cash flows should be used in an NPV calculation to determine which project to pursue? 1) The cash inflows expected as a result of the project. 2) Recurring cash flows from ongoing current operations. 3) Investment needed to be ma
• Finding the present value of a cash flow or series of cash flows is called discounting, and it is simply the reverse of compounding. In general, the present value is the value today of a future cash flow or series of cash flows. By solving for PV in the f
• Does the choice of cost flow method (FIFO, LIFO, or weighted average) affect the statement of cash flows? Explain.
• Determine the value of "Y" from the cash flows given in the table below at an interest rate of 8%. Year012345 Cash flows-10,000 + Y600700800900900
• Which of the following cash flows is not considered when using the net present value method? a. Future cash inflows. b. Future cash outflows. c. Past cash outflows. d. Non-uniform cash inflows. e. Future year-end cash flows.
• Use the cash flow given and a MARR = 12% to find the following: Year012345 Net Cash Flow, $+160,000-32,000-20,000-70,000-700-8,000 a) Determine the number of possible rate of return value
• For the cash flows shown, calculate the future worth in year 8 using i 10 per year Year 0 1 2 3 4 5 6 Cash Flow 100 100 100 100 100 300 300
• Determine the value of "X" from the cash flows given in the table below at an interest rate of 8% for a break-even cash flow. Year 0 1 2 3 4 5 Cash flows -10,000 + X 699 700 800 900 900
• Summarize the purpose of cash flows, including the meaning of the term cash in a statement of cash flows and what is included in a statement of cash flows.
• Which choice has a greater present value if we assume a required rate of return of 11%? (1) A lump-sum cash flow today of $248.69 (2) $100 cash flows occurring 1, 2, and 3 years from today (3) A si
• The cash flow statement presents the change in the cash balance for a given period of time. What information is captured on the cash flow statement? Why is it relevant to a decision-maker?
• How does the cash budget (i.e. cash flow forecast) differ from the Statement of Cash Flows?
• Calculate the Net Present Value (NPV) of the following cash flow projections based on a required rate of 10.5%: Year01234 Cash Flow(120,000)35,00047,50055,00062,000 Is this a good project for the business to accept? Explain why or why not.
• Consider the following two cash flows: Question A: Is there a difference in the present value of the preceding cash flows? Question B: If there is a difference, which investment decision has the greatest present value?
• On the statement of cash flows, why is it important to identify the three types of cash flows (operating, financing, and investing) separately?
• The purpose of the cash flow statement is to: a) Predict future cash flows. b) Evaluate management decisions. c) Predict ability to make payments to lenders. d) All of the above.
• What does it mean to classify a cash flow according to the basic nature or function of the event as opposed to the ultimate purpose of the transaction? Which method do you prefer?
• Using the following cash flow diagram: 0 1 2 3 4 56 7 -2600600850350850850850850 Calculate the net present value (NPV) and annual equivalent value (AE) of the cash flow diagram (7 years). The Minimum Acceptable Rate of Return (MARR) is 15%.
• All of the following are advantages of using the Discounted Cash Flow Method of evaluating capital expenditures except: A. Simple to compute and explain. B. Results are easily understood. C. Considers project's cash flow over its life. D. Considers time v
• The present value of cash flow allows an individual to assess: A. the value of a present cash flow. B. the value of a stream of cash flows in terms of the best alternative. C. both A and B. D. neither A nor B.
• Consider another uneven cash flow stream: (Year, Cash Flow) 0, $2,000 1, $2,000 2, $0 3, $1,500 4, $2,500 5, $4,000 a. What is the present (Year 0) value of the cash flow stream if the opportun
• Given a series of cash flows in the table below. Determine the value of "Y", when i = 7%. Year 0 1 2 5 Cash flow $2,000 -$1,500 -$7,500 Y A. $7,290 B. $8,350 C. $5,630 D. $7,802 E. None of these
• Consider another set of net cash flow : a) what is the net present value of the stream if the opportunity cost of capital is 10%? b) what is the value of the stream at the end of year 5 if the cash flow are invested in an account that pays 10 percent
• Consider another uneven cash flow stream: YearCash Flow 0 $2,000 1 2,000 2 0 3 1,500 4 2,500 5 4,000 a. What is the present (Year 0) value of the cash flow stream if the opportunity cost rate is 10 percent? b. What is the future (Year 5) value of the c
• Explain the concept of capital budgeting and detail the capital budgeting techniques used to make decisions. This includes the payback method, the accounting rate of return method, and the discounted cash flow method.
• Consider an uneven cash flow stream: Year Cash Flow 0 $2,000 1 2,000 20 3 1,500 4 2,500 54,000 a. What is the present (Year 0) value of the cash flow stream if the opportunity cost rate is 10 percent? b. What is the value of the cash flow stream at the
• Explain why there is a difference between cash flow from operating activities and cash flow from investing.
• Explain the use of a worksheet in preparing a statement of cash flows.
• Determine the term being defined or described by the following statement: Reports on an a business' cash receipts and cash payments during a period. Choose from the following terms: | Accounting equation | Asset | Balance Sheet | Expense | Income Sta
• What is the purpose of the statement of cash flows? What information does it provide? Explain why statement of cash flows are important when assessing the financial strength of an organization?
• Discounted cash flow valuation is based upon the notion that the value of an asset is the present value of the expected cash flows on that asset, discounted at a rate that reflects the riskiness of those cash flows. Specify whether the following statement
• Consider the infinite cash-flow series with repeated cash-flow patterns given in the table below. Determine i* for this infinite cash-flow series. The rate or return is __________%. n A n 0-$2,200
• Examine the business activity and decide for its classification from the choices below. Also, indicate if it is an inflow (-) or outflow (+). Activity: Obtain proceeds of long-term loan Choices: (O) Cash flow from operating activity (I) Cash flow from inv
• How to calculate statement of cash flows without journal entry?
• Consider an uneven cash flow stream: Year Cash Flow 0 3,000 1 2,000 2 1,500 3 0 4 2,000 5 4,000 a. What is the present (Year 0) value of the cash flow stream if the opportunity cost rate is 8 percent
• Describe the three basic types of cash flow activities.
• Consider the following two cash flows: Year Cash Flow "A" CashFlow "B" 1 $1,000 $3,000 2 5,000 4,000 3 5,000 5,000 4 4,000 5,000 53,000 1,000 Total $18,000 $18,000 A: Is there a difference in the present value of the preceding cash flows? B: If there is
• Differentiate between the Cash Flow and the Funds Flow statements.
• What does the statement of cash flow show, and what are the three classifications of activity in the statement of cash flows? Define each category and give examples of what is reflected in each section.
• Discounting is: a. Converting present value into its future value b. Value today of a payment to be received c. Calculating the future value using a formula d. Converting future cash flows to their present value
• State how the statement of cash flows helps investors and creditors perform in predicting future cash flows.
• Determine the term being described or defined by the following statement: Statement of financial position (balance sheet), income statement, and statement of cash flows. Choose from the following terms: | Financial accounting | Management accounting |
• Examine the business activity and decide for its classification from the choices below. Also, indicate if it is an inflow (-) or outflow (+). Activity: Issue common stock for cash Choices: (O) Cash flow from operating activity (I) Cash flow from investing
• Consider the cash flow transactions below. [TABLE] a. If we discount cash flows at 10% per year, the Net Present Value (rounded to the nearest dollar) of these cash flows as of 4/10/2011 is [{Blank}] b) The Internal Rate of return on the cash flows (ro
• The statement of cash flows should NOT be used to evaluate an entity's ability to: a. pay dividends b. earn net income c. meet obligations d. generate future cash flows
• Analyze why an organization needs to have a statement of cash flows along with their balance sheet and income statement. Evaluate what the statement of cash flows reveals about an organization.
• Identify which of the following cash flow patterns most likely belongs to (1) a start-up, high-growth company, (2) a steady-state company, and (3) a cash cow. Operating Investing Financing Cash Flow Cash Flow Cash Flow Company A $(10,000) $(27,000) $ 40
• The accrual basis of accounting creates the need for a statement of cash flows. Explain.
• Describe how the statement of cash flows under GASB standards differs from the statement of cash flows under FASB standards.
• Examine the business activity and decide for its classification from the choices below. Also, indicate if it is an inflow (-) or outflow (+). Activity: Pay dividends to common shareholders Choices: (O) Cash flow from operating activity (I) Cash flow from
• The statement of cash flows should not be used to evaluate an entity's ability to: a. earn net income. b. generate future cash flows. c. pay dividends. d. meet obligations.
• Given the following cash flows for a capital project, calculate the IRR. Year 0 1 2 3 4 5 Cash Flows ($50,467) $12,746 $14,426 $21,548 $8,580 $4,959 Options: a. 8.41%. b. 8.05%. c. 8.79%. d. 7.9%.
• In making capital budgeting decisions, the discounted cash flow method aids in evaluating investments involving cash flows over time where there is a significant time difference between cash payment and receipt. Analysts use which two discounted cash flow
• How to prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities.
• Consider the complexities of forecasting cash flow. Take the perspective of either a small business owner or a finance manager at a large corporation. Identify at least three variables that can affect cash flow. For each variable you identify, explain its
• The benefits of a statement of cash flows are to A. determine ability to pay indebtedness and cash dividends. B. estimate future cash flows. C. evaluate asset management D. all of the above
• Examine the business activity and decide for its classification from the choices below. Also, indicate if it is an inflow (-) or outflow (+). Activity: Buy inventory for resale Choices: (O) Cash flow from operating activity (I) Cash flow from investing ac
• Examine the business activity and decide for its classification from the choices below. Also, indicate if it is an inflow (-) or outflow (+). Activity: Receive dividend on an investment Choices: (O) Cash flow from operating activity (I) Cash flow from inv
• Compute the net present value of the expected cash flows and the actual cash flows as of the beginning of the investment. What do you conclude from this post audit?
• Select all that is true about the Cash flow of the firm. A. Free cash flow from an operating perspective must equal free cash flow from a financing perspective. B. Positive operating free cash flows are equal to the cash flows distributed to the firm's i
• Find the present values of the following cash flow streams. The appropriate interest rate is 8%. |Year |Cash Stream A | Cash Stream B |1 | $100 |$300 |2 |$400 | $400 |3 |$400 | $400 |4 | $400 | $400 |5 | $300 | $100 What is the value of each cash
• Examine the business activity and decide for its classification from the choices below. Also, indicate if it is an inflow (+) or outflow (-). Activity: Purchase land for cash Choices: (O) Cash flow from operating activity (I) Cash flow from investing acti
• A valuable tool for evaluating the cash position of a business is called the free cash flow. What exactly is the free cash flow? How is it calculated? Why is it important?
• The following are four sets of cash flow: c) A cash inflow of $400 at the end of year 3 and a cash inflow of $500 at the end of year 5. Determine the present value of each of the sets of cash flows using a discount rate of 10%. see attached file for all q
• Explain the basic formats of financial statements, such as the income statement, balance sheet, statement of cash flows, and statement of retained earnings.
• What advantages do you see for classifying interest expense as an investing cash flow rather than an operating cash flow? What is the advantage of classifying it as an operating cash flow? What is the advantage of classifying it as a financing cash flow?
• Explain the functions and data measurements of the balance sheet, income statement and statement of cash flows.
• Examine the business activity and decide for its classification from the choices below. Also, indicate if it is an inflow (-) or outflow (+). Activity: Issue common stock for land Choices: (O) Cash flow from operating activity (I) Cash flow from investing
• Examine the business activity and decide for its classification from the choices below. Also, indicate if it is an inflow (-) or outflow (+). Activity: Sell goods for cash Choices: (O) Cash flow from operating activity (I) Cash flow from investing activit
• List the purposes of the Statement of Cash Flows and briefly describe each.
• 1. Which of the following is not an appropriate use of the statement of cash flows? a. Predictability to pay debts b. Evaluate managers' decisions. c.Analyze profitability and liquidity. d.Predict
• Predicting future cash flows is important to determine the viability and value of a company. Describe the different components of the cash flow statement and the information it provides to users.
• Use the following codes to indicate how the cash flow effect, if any, of each transaction or event would be reported on a statement of cash flows if the operating activities section is prepared using the indirect method. (Choices may be used more than onc
• The cash payback method of evaluating a capital investment project: a. does not incorporate the use of time value of money concepts. b. will always consider all of the cash flows related to a project. c. is relatively easy to calculate. d. two of the abov
• Explain the relationship between the balance sheet, the income statement, and the statement of cash flows using the indirect method. That is, how to prepare a statement of cash flows using the indirect method?
• Explain the relationship between the balance sheet, the income statement, and the statement of cash flows using the indirect method. That is, how do you prepare a statement of cash flows using the indirect method?
• Which of the following items is not necessary for preparing a statement of cash flows? a. Determine the change in cash. b. Determine the cash provided by operations. c. Determine cash from financing and investing activities. d. Determine the cash in all b
• Select all that is true about the Cash flow of the firm. A. While an income statement measures a company's profits, profits are not the same as cash flows; profits are calculated on a cash basis rather than an accrual basis. B. In measuring free cash flo
• How does a dividend payment affect cash flow in the statement of cash flows?
• When creating the cash flow statement, does the indirect method have flaws because it does not adjust every item in the income statement, therefore making it harder for mistakes to be easily recognized? Explain.
• Examine the business activity and decide for its classification from the choices below. Also, indicate if it is an inflow (-) or outflow (+). Activity: Acquire treasury shares Choices: (O) Cash flow from operating activity (I) Cash flow from investing act
• What is the relationship between free cash flow and the statement of cash flows? Why does the income statement not present the cash inflows and outflows?
• For the transaction: Pay bank note, determine if it is (1) a source of cash, (2) a use of cash, and/or (3) an adjustment leading to a source or use of cash. Determine also its placement in the statement of cash flows: operations (O), financing (F), Invest
• Should a CEO be evaluated based on one year's cash flows? Why or why not? (Hint: Your answer might be affected by your definition of cash flow.)
• Describe in detail the purpose and use of a balance sheet, income statement and statement of cash flows
• Consider a cash flow and interest profile as shown: The worth at the end of Year 3 of these cash flows is: $6, 792.52 $6, 540.00 $6, 100.00 $6, 302.68
• List the purposes and uses of the statement of cash flows, and discuss the three activities that the statement of cash flows depicts.
• Which of the following is not a use of the statement of cash flows? a. Aids in the prediction of future cash flow. b. Helps estimate the amount of funds that will be needed from creditors or stockholders. c. Provides insights into the quality and reliabil
• For the transaction: pay dividend, determine if it is s(1) a source of cash, (2) a use of cash, and/or (3) an adjustment leading to a source or use of cash. Determine also its placement in the statement of cash flows: operations (O), financing (F), Invest
• Draw cash flow diagrams for all problems. 1. The following cash flow is given List all possible rates of return for this cash flow. 2. For the cash flow from problem #1, the MARR is 20% and the ex
• Find the present value at the end of year 3 of the following stream of cash flows received at the end of each year, assuming the firm can earn 17% on its investment. Cash flows are as follows: Year 1 $3,500 Year 2 $4,250 Year 3 $6,000. Answer: A. 13,
• Which of the two following options has a greater present value if we assume a required rate of return of 8%? Option (a): We receive a lump-sum cash flow today of $248.69. Option (b): We receive a single cash flow of $331 exactly 3 years from today.
• Examine the business activity and decide for its classification from the choices below. Also, indicate if it is an inflow (-) or outflow (+). Activity: Pay employee salaries Choices: (O) Cash flow from operating activity (I) Cash flow from investing activ
• 1. What would be an indicator for assessing the ability to generate positive future net cash flow? 2. What line items within the statement of cash flow would be able to be tell the future?
• Which category of cash flows is most significant on the statement of cash flows? Explain.