CCT Project Financial Analysis 3

Question 1

What is the Weighted Average Cost of Capital (WACC) primarily used for in project financial analysis?

Accepted Answer

Discounting future project cash flows

Answer

WACC represents the blended cost of equity and debt financing and is commonly used as the discount rate for NPV calculations.

Question 2

A project has fixed costs of $200,000, a selling price of $50 per unit, and variable costs of $30 per unit. What is the break-even volume?

Accepted Answer

10,000 units

Answer

Break-even = Fixed Costs / (Price − Variable Cost) = $200,000 / ($50 − $30) = 10,000 units.

Question 3

Which of the following best describes 'opportunity cost' in project financial decision-making?

Accepted Answer

The return foregone from the next best alternative investment

Answer

Opportunity cost is the forgone benefit of the best alternative not chosen when committing resources to a project.

Question 4

In a sensitivity analysis, which variable is typically analyzed by changing it while holding all other inputs constant?

Accepted Answer

One variable at a time

Answer

Sensitivity analysis tests how the project outcome changes when one input variable is altered while others remain fixed.

Question 5

A project's NPV is positive at a 12% discount rate but negative at 18%. Where does the IRR lie?

Accepted Answer

Between 12% and 18%

Answer

IRR is the discount rate where NPV equals zero, so it must fall between the rates where NPV is positive and negative.

(CCT) Certified Cost Technician Practice Test