FIN 575 Final Exam

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FIN 575 Final Exam (Latest Version)
1. During the project initiation, a project charter is created. The project charter
should include which of the following?
Project managers expenses
Analysis of budget
Selection of the senior project manager
Projects high-level deliverables
2.A project's budget should be based on a companys
strategy and financial goals
profitability
financial goals and equity
debt load and equity
3.Earned value management is a technique used to integrate projects
resources
scope, schedule, and resources
schedule, costs, and benefits
costs and profits

4. Bills Billiards has total assets of $8 million and a total asset turnover of 2.9
times. If the return on assets is 11%, what is Bill's profit margin?
11%
4.10%
2.50%
3.79%
5. What are the acceptance criteria for NPV?
If the NPV is less that $0, accept the project.
If the NPV is greater than $0, accept the project.
If the IRR is equal to 0%, reject the project.
If the NPV is equal to the discounted payback, accept the project.
6. The risk response plan answers what question?
What can be done if risk occurs? What is the backup plan?
What are project costs?
There is no need to plan for risk seldom occurs in a project.
How risk is to be managed
7. For the most recent year, Cals Cats had sales of $380,000, cost of goods sold of
$93,000, depreciation expense of $47,000, and additions to retained earnings of
$61,420. The firm had $52,000 in interest expense, and 34% tax rate. What were
the times interest earned ratio?
2.2
5.8
4.61

2.8
8. Bobs Garages has sales of $41 million, total assets of $32 million, and total debt
of $11 million. If the profit margin is 12% what is the return on equity (ROE)?
14%
12%
51%
23.40%
9. What are the components of project planning that need monitoring?
Resource procurement and quality
Project cost and risk
Project cost, risk, resource procurement and quality
Quality and control
10. During project planning, the project team creates a work breakdown structure
that details work tasks that must be completed. The work breakdown structure
should include a
schedule of when every task will start and be completed
schedule of project staff meetings
set of management tasks
budget analysis
11. The R. M. Senchack Corporation earned an operating profit margin of 6%
based on sales of $11 million and total assets of $6 million last year. What was
Senchacks total asset turnover ratio?
1
0.54
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5.4
1.8
12. Why is the communication plan a crucial factor in project success?
Ensures the timely generation, collection, storage, and disposition of project
information
Facilitates upper management communication with the workers
Reduces rumors in the organization
Communicates the economic value of the project to management
13. A companys assets are financed with
debt
equity
equity or debt
equity and debt
14. Part of financial planning for projects involves the understanding of the inflows
and outflows of cash that will be created by the project. What tool can be used to
track these cash flows?
A NPV flow sheet
Profitability work sheet.
Project cash flow worksheet
Cash flow table
15. Stokes, Inc. has net working capital of $7,900, current liabilities of $5,220, and
inventory of $2,000. What is the quick ratio.
1.89

1.13
1.21
2.1
16. What ratio measures a firms degree of indebtedness?
Debt ratio
Quick ratio
Fixed coverage ratio
Times interest earned ratio
17. Which one of these terms is a type of debt financing?
Stock repurchases plans
Collateral
Trade credit
Bearer bonds
18. The sum of the percentage of equity and debt multiplied by their respective
cost is called
weighted average cost of capital
capital asset pricing model
market value added
economic value added.
19. Profitability ratios all have what same figure in the numerator?
Book value per
Net income
5

Price per share

Total assets
20. Terrys Trash removal has a total debt ratio of 0.45. What is the firms debt-toequity ratio?
1.27
0.41
0.82
1.82
21. An investment in a project should be undertaken only if the expected return is
greater than the
NPV
WACC
payback method
economic value added
22. Brenda Smith, Inc. had a gross profit margin (gross profits sales) of 25% and
sales of $9.75 million last year. Seventy-five percent of the firms sales are on
credit and the remainder are cash sales. Smiths current assets equal $1,550,000, its
current liabilities equal $300,000, and it has $150,000 in cash plus marketable
securities. If Smiths accounts receivable are $562,500, what is its average
collection period?
25 days
32 days
28 days
14 days

23. You are considering a project with an initial cash outlay of $160,000 and
expected free cash flows of $40,000 at the end of each year for 6 years. The
required rate of return for this project is 10%. What is the projects payback
period?
4 years
4.5 years
6 years
5 years
24. Project managers manage project cost by
monitoring inventory costs
monitoring opportunity costs
ensuring the work is progressing as planned
ensuring retail costs are controlled
25. What is the primary weakness commonly associated with the use of the
payback method to evaluate a proposed investment?
This approach fails to take into account the time factor in the time value of money.
The payback method uses the discounted cash flow process.
The payback method is able to recognize cash flows that occur after the payback
period.
The payback method is not appropriate for evaluating small projects.
26. Fijisawa, Inc. is considering a major expansion of its product line and has
estimated the following free cash flows associated with such an expansion. The
initial outlay associated with the expansion would be $1,950,000, and the project
would generate free cash flows of $450,000 per year for 6 years. The appropriate
required rate of return is 9%. Calculate the net present value and the internal rate of
return.
7

NPV=$66,098, IRR=10.5
NPV=$72,097, IRR=9.5
NPV=$68,663, IRR=10.2
NPV=$69,368, IRR=10
27. Cost normally falls into the domain of managerial accounting and has 4
essential proposes. Select the answer that is an essential function of cost.
Used to calculate earned value cost
Used to calculate executive stock options
Used to calculate inventory costs
Used for planning future activities or budgets
28. Select the answer that is an example of a cost classification?
Credit cost
Fixed cost
Retail cost
Inventory cost
29. What are the four secondary processes in project control?
Schedule control, change control, risk control, and quality assurance control
Value control, Inventory control, schedule control and quality control
Organizational control, cost control, inventory control, and risk control
Stakeholder control, organization control, risk control, and change control
30.Stokes, Inc. has net working capital of $7,900, current liabilities of $5,220, and
inventory of $2,000. What is the current ratio?
2.1
8

0.77
1.89
1.51

Week 2

FIN 575 Week 2 Individual Assignment Project Plan Outline

FIN 575 Week 2 Project Plan Outline
Review Case Study: Pontrelli Recycling, Inc. in Project Management
Accounting, Ch. 7.
Prepare an outline of a project plan based on the case study.
Describe the seven primary planning activities.
Evaluate project execution, efficiency, and alignment with the companys financial
strategy.
Illustrate how project control can help mitigate risks for Pontrelli.

Week 3
FIN 575 Week 3 Individual Assignment Project Proposal
FIN 575 Week 3 Project Proposal
Write no more than a 450- to 1,350-word proposal which applies the methods for
calculating a projects viability.
Select one of the following organizations:
British Petroleum (BP)
Ford Motor Co.
Applied Materials
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Review the organizations annual report by researching your chosen organization.

Write a proposal advising the selected organization on obtaining funding and
managing a project budget, to purchase equipment to increase worker safety. The
initial investment is $25M and the yearly cash inflows are as follows:
Year 2 $5M
Year 3 $10M
Year 4 $15M
Year 5 $12M
Assume all cash flows are at the beginning of the period and a discount rate of
10%.
Include the following information in your project proposal:
Define business needs in an overview of the project, including high-level
deliverables to solve the problem.
Describe the net present value (NPV), internal rate of return (IRR), profitability
index, and payback methodologies for calculating the projects viability. Examine
the strengths and weakness of each methodology.
Calculate NPV, IRR, profitability index, and payback method. Explain the rationale
for accepting or rejecting the project based on its financial viability.
Format your proposal consistent with APA guidelines.

Week 4

FIN 575 Week 4 Learning Team Assignment Financial Ratio Analysis Paper
FIN 575 Week 4 Financial Ratio Analysis Paper
Select one of the organizations listed in Week Three. For this assignment you must
use information provided directly by the selected company using either the
company's published annual report, or the financial data in the most recent 10-K
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report that may be downloaded from the SEC's EDGAR website

(https://www.sec.gov/edgar/searchedgar/companysearch.html).
Do NOT use third party websites such as Yahoo, Bloomberg, or any other
investment advisor site to obtain this data.
Write a 1,750- to 2,100-word paper discussing the financial condition of the
organization based on the following financial ratio calculations. Include your
calculation for each of these:
Profitability ratios
gross margin
operating margin
net margin
return on assets
return on equity
Liquidity ratios
quick ratio
current ratio
working capital
times interest earned ratio
Activity ratios
average collection period
inventory turnover
fixed assets turnover
days in inventory

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Solvency ratios
debt to equity ratio
equity ratio
debt ratio
Summarize and define the key financial ratios for the organization. You will need
to calculate these ratios and use them to determine the organizations financial
condition and answer the following questions.
How much has the company borrowed? Is the debt likely to cause financial
distress?
How liquid is the organization? Is cash readily available?
How efficiently is the organization using its assets? Are there signs of inefficient
use?
How profitable is the organization?
Calculate the ROE for the organization you selected and then break down your
answer into its component parts using the DuPont method.
Explain how the DuPont method can help us understand where a company is
having financial troubles.
INCLUDE after your References the income statement and the balance sheet that
are used to make the calculations.
Format your paper consistent with APA guidelines.

Week 5
FIN 575 Week 5 Individual Assignment Project Cost Assignment
FIN 575 Week 5 Project Cost Assignment
For this assignment, choose from the following options:
Option 1: Project Cost Presentation
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 Option 2: Project Cost Video

Read the instructions in Project Cost Assignment Options and select one option to
complete the assignment.

Week 6
FIN 575 Week 6 Learning Team Assignment Project Plan Overview
FIN 575 Week 6 Project Plan Overview
Read the Case Study: Pontrelli Recycling, Inc. in Ch. 7 of the Project Management
and Accounting text
Prepare no more than a 2,800-word Project Plan Overview of the Pontrelli case.
Assume the high level cost estimate for the project is $8.8 million.
The focus of this assignment is to develop a plan to finance the $8.8M Pontrelli
project.
Include the following:
What are the strengths and weaknesses of debt and equity financing? Discuss
possible sources of debt financing. Propose a strategy for Pontrelli to obtain project
financing. Your submission must include one financing proposal that will be a
mixture of debt and equity financing, and you must also include an alternative
project financing proposal that can be used if the financial decision maker(s) were
to not accept your first proposal.
Compare and contrast EVA and MVA.
Define WACC. How is WACC calculated? What are its strengths and weaknesses?
Why is understanding WACC important?
Calculate project viability, using the profitability index.
Propose an alternate capital structure for Pontrelli. (This will be used if the
financial decision maker rejects your first proposal.)
Develop an alternate project budget. (This will be used if the financial decision
maker rejects your first proposal.) What are the constraints?
13

Create an alternate plan to manage the project budget. (This will be used if the
financial decision maker rejects your first proposal.) Using Exhibit 7.8 as a
template.

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