Harvard University MGMT E-1000Quiz 7-ALL ANSWERS CORRECT-GRADED A

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Module 7 Quiz 1) Which of the following is INCORRECT in determining free cash flows? Adjust net income for interest expense This is NOT the correct answer because it is true; you do adjust net inco... me for interest expense in determining free cash flows. Subtract capital expenditures This is NOT the correct answer because it is true; you do subtract capital expenditures in determining free cash flows. Subtract depreciation correct This is the correct answer! It is NOT true. You ADD BACK depreciation in determining free cash flows. Subtract change in working capital This is NOT the correct answer because it is true; you do subtract the change in net working capital in determining free cash flows. 2) A project has an initial cost of $44,000. Expected cash flows as a result of this project are projected as indicated below. Calculate the payback period for this project. Assume a discount rate of 9%.The correct answer is 3.5 years. At the end of year 3 the project has returned $35,000 ($10,000 + $10,000 + $15,000). This leaves $9,000 to be returned to hit payback. Assuming that the $18,000 projected for year 4 comes in a steady stream, this would mean it would take half of that year. =3+(44000-(B4+B5+B6))/18000 [Show More]

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