1. Which of the following describes loan cash flow (LCF)?
A) A term used when borrowed money is involved, equal to the gross income less deductions (not including either depreciation or principal or interest on the loan).
B) The cash flow reflecting the sum of the principal payment and the interest payment.
C) A term used when no borrowed money is involved, equal to the gross income less deductions (excluding depreciation allowances).
D) The amount remaining after income taxes and deductions (including interest, but excluding depreciation allowances) are subtracted from gross income.
2. When an investment is 100% financed from borrowed money, which of the following statements is true?
A) Neither the principal nor the interest payments are cash flows.
B) The principal payments are cash flows, but the interest payments are not cash flows.
C) The principal payments are not cash flows, but the interest payments are cash flows.
D) Both the principal and the interest payments are cash flows.
3. Which of the following describes after-tax cash flow (ATCF)?
A) A term used when no borrowed money is involved, equal to the gross income less deductions excluding depreciation allowances.
B) The amount remaining after income taxes and deductions (including interest, but excluding depreciation allowances) are subtracted from gross income.
C) A term used when borrowed money is involved, equal to the gross income less deductions (not including either depreciation or principal or interest on the loan).
D) The cash flow reflecting the sum of the principal payment and the interest payment.