CFA Practice Question

There are 151 practice questions for this study session.

CFA Practice Question

Which of the following statements is false?

A. The initial investment includes the up-front cost of fixed assets plus any increases in net working capital.
B. The operating cash flows are the incremental cash inflows over the project's economics life.
C. Terminal year cash flows exclude the after-tax salvage value of the fixed assets, adjusted for taxes, and the return of the net working capital.
D. The net cash flow is determined as the sum of the cash flows from the initial investment, the operating cash flows, and the terminal year cash flows.
Correct Answer: C

The terminal year cash flows include the cash flow received from the sale of the asset (adjusted for taxes) and the amount recovered from the net working capital.

User Contributed Comments 3

User Comment
BryonBUI Don't quite agree with D. What is the concept of Net CF? where is TVM?
shash0678 I too feel D is incorrect since PV is not mentioned.
davidt87 net cash flow is just that. no adjustment for time value of money
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