The Present Value of the Expected Net Cash Flows of All

question 30

Multiple Choice

The present value of the expected net cash flows of all the projects undertaken by a firm will most likely exceed the present value of the firm's expected net profit after tax, because:

• A)income is reduced by taxes paid, whereas cash flow is not.
• B)there is a greater probability of actually receiving the projected cash flows than the forecasted income.
• C)income is reduced by dividends paid, whereas cash flow is not.
• D)income is reduced by depreciation and other non-cash charges, whereas cash flows are not.
• E)cash flows lead to changes in net working capital, whereas sales do not.

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Definitions:

Transactions

Acts of buying, selling, or exchanging goods, services, or financial assets in the market.

Double Entry

An accounting principle that requires every financial transaction to be recorded in two accounts, debit and credit, to keep financial statements balanced.

Balance Sheet

A balance sheet that presents a firm's financial position, detailing its assets, liabilities, and owners' equity at a particular moment.

Current Liabilities

Short-term financial obligations of a company that are due to be paid within one year.