Which of the following statements are true for project finance (select all that apply):Group of answer choicesCapital investment decisions are more transparent to creditors in a corporate finance than in project financeThe cost of an average financial transaction is lower with the corporate finance than with project financeThe cost of capital is generally higher with project finance than corporate financeInvestors have more visibility into dividend policies with project finance than with corporate finance

Multiple Choice QuestionWhich of the following determines whether firms will use borrowed funds for investment projects?Multiple choice question.The firms' operational abilities to produce particular goods or servicesThe demand by customers for a popular good or serviceThe interest rate in relation to the rate of return on the projectManagerial decisions based only upon accounting profits

Which of the following statements is FALSE?Group of answer choicesAs a practical matter, to derive the forecasted cash flows of a project, financial managers often begin by forecasting earnings.When evaluating a capital budgeting decision, we generally include interest expense.The decision to continue or abandon a project should be based only on the incremental costs and benefits of the project going forward.Earnings are not cash flows.

The main difference between project finance and other forms of lending is:Question 8Select one:a.lenders base their participation on expected future cash flows and assets of the project.b.lenders take a major equity stake in the project.c.the project company, which is set up as a separate legal entity, relies heavily on venture capitalists for equity funding.d.the lenders have a claim on the assets of the project as well as the sponsors.

Which of the following statements is FALSE?Group of answer choicesSunk costs have been incurred regardless of the decision whether or not to proceed with the project.When performing capital budgeting, we do not usually calculate the tax associated with the capital expenditure.When computing the incremental earnings of an investment decision, we should include all changes between the firm's earnings with the project versus without the project.Overhead expenses are associated with activities that are not directly attributable to a single business activity but instead affect many different areas of the corporation.

Which of the following statements is FALSE?Group of answer choicesIncome Tax = EBIT × Corporate Tax RateWe begin the capital budgeting process by determining the incremental earnings of a project.When sales of a new product displace sales of an existing product, the situation is often referred to as opportunity cost.Managers sometimes continue to invest in a project that has a negative NPV because they have already invested a large amount in the project and feel that by not continuing it, the prior investment will be wasted.