QUESTIONS 61 THROUGH 72 RELATE TO CORPORATE FINANCE. (18 MINUTES)AN AN...

8.2%.

Question #71 of 120

Question ID: 1146359

Bear Company produces gravel-hauling equipment. The company recently began producing the Mauler, a new line of

equipment. Prior to beginning production of the Mauler, the company spent $10 million in research and development costs.

Bear expects the Mauler line to generate positive cash flows beginning in the fourth year. However, Bear is forecasting a one-

time expense in year 5 to comply with new government emission standards. The company will use an empty building it

already owns to produce the Mauler. When analyzing the project cash flows for the Mauler, Bear should least

appropriately include:

A)

the use of the empty building.

B)

the research and development cost.

the compliance cost for emissions standards.

C)

Question #72 of 120

Question ID: 1146377

An analyst has calculated the following statistics for Company X and Company Y.

Company X Company YYear 1 Year 2 Year 1 Year 2Number of days of inventory 18 22 33 24Number of days of receivables 14 16 14 12Number of days of payables 19 20 18 20

The net operating cycle for:

Company Y was 16 days in year 2, an improvement in

liquidity compared to year 1.

Company Y was 36 days in year 2, a decline in liquidity

compared to year 1.

Company X was 18 days in year 2, an improvement in

Question #73 of 120

Question ID: 1146378