FIN 370 Course Great Wisdom / tutorialrank.com FIN 370 Course Great Wisdom / tutorialrank.com | Page 5

annually throughout that machine’s four-year life. Both machines will
be worthless at the end of their life. If you intend to replace
whichever type of machine you choose with the same thing when its
life runs out, again and again out into the foreseeable future, and if
your business has a cost of capital of 14 percent, which one should
you choose?
Machine A
Machine B
Neither machine A nor B
Both machines A and B
When firms use multiple sources of capital, they need to calculate
the appropriate discount rate for valuing their firm’s cash flows
as__________.
a simple average of the capital components costs
a weighted average of the capital components costs
a sum of the capital components costs
they apply to each asset as they are purchased with their respective
forms of debt or equity
Which of these is used as a measure of the total amount of available
cash flow from a project?
Operating cash flow
Investment in operating capital