4.10. Test your knowledge of Module 4

iDevice icon Reflective question
Which components are critical to the development and analysis of any cash flow model?
iDevice icon Reflective question
Identify four methods used to analyze cash flow!
iDevice icon Reflective Question
How can risk impact the cost of capital?
Multi-select
Which of the following are acceptable techniques for risk management?

Portfolio management
Price agreements between bidders
Guarantees
Financial accounts
Swaps
Insurance



iDevice icon Reflective Question
Briefly describe a swap?
iDevice icon Reflective question
Why is debt capital 'cheaper' (lower rate or return) than equity?
iDevice icon Reflective question
Identify two key differences between debt and equity.
True-False Statement


Common equity is expected to have a higher rate of return and come with a higher risk to the investor than preferred equity.

True False

Senior debt is expected to have a higher rate of return and come with a higher risk to the investor than common equity.

True False
IDevice Question Icon Multi-choice
Commercial loans are usually considered:
       
senior debt and thus have first rights to project assets in the event of default;
subordinated debt;

iDevice icon Reflective question
What are grants?
Multi-select
Who will finance and how much debt relative to the amount of equity will be used? Which of the following factors contribute to the capital structure?

project cycle and cash flow;
taxes;
financial risk and flexibility;
cost of capital and timing.



Multi-select
Identify the sources of debt capital!
Preferred shares;
Commercial loans;
Bonds;
Common equity;
Subordinated debt;
Line of credit;



iDevice icon Cloze Activity
Read the paragraph below and fill in the missing words.

The optimum level of debt and will exist when the capital structure " the risk of bankruptcy with the savings of debt". The risk with having too much debt is that a project with fluctuating cash flow may be forced into if the debt are not met, even though the project may still be financially profitable and cash flow positive.
  

iDevice icon Cloze Activity
Read the paragraph below and fill in the missing words.

A measures only cash flow and any items that can have a financial impact on those cash flows. In contrast, an considers not only the financial impact, but also any external benefits and costs to stakeholders - regardless of whether or not impacts have a value.
  

iDevice icon Cloze Activity
Read the paragraph below and fill in the missing words.

financiers are interested in assessing the cash flow that goes directly to servicing debt, whereas financiers, like project sponsors, look at cash flow after tax in order to assess a project's return on .
  

IDevice Question Icon Multi-choice
Which of the three coverage ratios is a historical measures?
  
Loan Life Coverage Ratio (LLCR)
Debt Service Coverage Ratio (DSCR)
Project Life Coverage Ratio (PLCR)

iDevice icon Reflective question
How does PIRR differ from NPV?

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