Question 1

Discounted-cash-flow models focus on a project's cash inflows and cash outflows without regard to the time value of money.

Accepted Answer

A) True 
 B)False

Question 2

An asset with a book value of $50,000 is sold at a loss before taxes are considered) of $20,000.The applicable tax rate is 50%._____ is the tax effect of the loss.

Accepted Answer

A) $10,000 cash inflow 
B) $10,000 cash outflow 
C) $25,000 cash inflow 
D) $35,000 cash inflow 
A) $10,000 cash inflow 
B) $10,000 cash outflow 
C) $25,000 cash inflow 
D) $35,000 cash inflow

Question 3

Assume that the desired rate of return is 10% and that interest is compounded annually. Identify how much must be invested today to have $10,000 in 5 years and 10 years, respectively.

Accepted Answer

A) $5,000; $1,000 
B) $3,791; $6,145 
C) $6,209; $3,855 
D) $1,000; $5,000 
A) $5,000; $1,000 
B) $3,791; $6,145 
C) $6,209; $3,855 
D) $1,000; $5,000

Question 4

Lonesome Company, with pretax income of $80,000, is required to pay taxes of 25% on all income up to $20,000 and 35% on any income in excess of $20,000.Lonesome Company 's average tax rate is _____.

Accepted Answer

A) 25.0% 
B) 26.5% 
C) 30.0% 
D) 32.5% 
A) 25.0% 
B) 26.5% 
C) 30.0% 
D) 32.5%

Question 5

DCF methods are not based on the theory of compound interest.

Accepted Answer

A) True 
 B)False

Question 6

An asset with a book value of $320,000 is sold at a $240,000 pre-tax gain in a year when the tax rate is 20%.A _____ is the tax effect of the gain.

Accepted Answer

A) $144,000 cash outflow 
B) $656,000 cash outflow 
C) $224,000 cash outflow 
D) $48,000 cash outflow 
A) $144,000 cash outflow 
B) $656,000 cash outflow 
C) $224,000 cash outflow 
D) $48,000 cash outflow

Question 7

At the current discount rate, the net present value of an 8-year project is zero.Assuming that the current discount rate and the annual cash flows are unchanged, identify which one of the following statements is true.

Accepted Answer

A) The project will be desirable if the project's life is increased to 10 years. 
B) The project will be desirable if the project's life is reduced to 5 years. 
C) The project is equally desirable at 5 and 10 years. 
D) The project is equally undesirable at 5 and 10 years. 
A) The project will be desirable if the project's life is increased to 10 years. 
B) The project will be desirable if the project's life is reduced to 5 years. 
C) The project is equally desirable at 5 and 10 years. 
D) The project is equally undesirable at 5 and 10 years.

Question 8

In relevant-cost analysis, the only pertinent overhead costs are those that _____.

Accepted Answer

A) vary with production levels 
B) will differ among alternatives 
C) are fixed within a relevant range 
D) remain the same among alternatives 
A) vary with production levels 
B) will differ among alternatives 
C) are fixed within a relevant range 
D) remain the same among alternatives

Question 9

The NPV method computes the present value of all expected future cash flows using a maximum desired rate of return.

Accepted Answer

A) True 
 B)False

Question 10

The marginal tax rate is the _____.

Accepted Answer

A) average rate for the company 
B) highest possible rate the company might be expected to pay 
C) lowest tax rate applicable to the company 
D) rate paid on additional amounts of pretax income 
A) average rate for the company 
B) highest possible rate the company might be expected to pay 
C) lowest tax rate applicable to the company 
D) rate paid on additional amounts of pretax income

Question 11

The purposes of postaudits include all of the following except _____.

Accepted Answer

A) seeing that investment expenditures are proceeding on time and within budget 
B) providing information for improving future predictions of cash flows 
C) evaluating the continuation of the project 
D) comparing actual project results with similar projects to evaluate manager performance 
A) seeing that investment expenditures are proceeding on time and within budget 
B) providing information for improving future predictions of cash flows 
C) evaluating the continuation of the project 
D) comparing actual project results with similar projects to evaluate manager performance

Question 12

The cash outflow for the purchase of equipment is an example of an operating cash flow.

Accepted Answer

A) True 
 B)False

Question 13

A capital-budgeting model that recognizes the value of contingent investments

Accepted Answer

The answer of A capital-budgeting model that recognizes the value...

Question 14

If the appropriate tax rate is 40%, the after-tax effect of a $100,000 savings in labor cost is _____.

Accepted Answer

A) $40,000 net after-tax cash outflow 
B) $40,000 net after-tax cash inflow 
C) $60,000 net after-tax cash outflow 
D) $60,000 net after-tax cash inflow 
A) $40,000 net after-tax cash outflow 
B) $40,000 net after-tax cash inflow 
C) $60,000 net after-tax cash outflow 
D) $60,000 net after-tax cash inflow

Question 15

The _____ is not considered an outflow at time zero.

Accepted Answer

A) initial investment of inventories and receivables 
B) disposal value of new equipment 
C) installation cost of new equipment 
D) disposal cost of old equipment 
A) initial investment of inventories and receivables 
B) disposal value of new equipment 
C) installation cost of new equipment 
D) disposal cost of old equipment

Question 16

A company pays taxes of 25% on their first $25,000 of pretax income, and 40% on any taxable income in excess of $25,000.The marginal tax rate, if current pretax income is $30,000, is _____.

Accepted Answer

A) 25% 
B) 30% 
C) 40% 
D) none of these answers is correct 
A) 25% 
B) 30% 
C) 40% 
D) none of these answers is correct

Question 17

The method companies use to depreciate most assets under United States income tax laws

Accepted Answer

Modified a

Question 18

Because future inflation has no effect on the current purchase price of an asset, inflation factors can be ignored when capital-budgeting decisions are made.

Accepted Answer

A) True 
 B)False

Question 19

The differential approach can be used to compare any number of projects.

Accepted Answer

A) True 
 B)False

Question 20

When using the net?present?value method, if the sum of the present values of the cash flows is positive, then the _____.

Accepted Answer

A) project should be rejected 
B) project is desirable 
C) present value of the cash outflows exceeds the present value of the cash inflows 
D) decision maker would be indifferent between accepting and rejecting the project 
A) project should be rejected 
B) project is desirable 
C) present value of the cash outflows exceeds the present value of the cash inflows 
D) decision maker would be indifferent between accepting and rejecting the project

Discounted-cash-flow models focus on a project's cash inflows and cash outflows without regard to the time value of money.

An asset with a book value of $50,000 is sold at a loss before taxes are considered) of $20,000.The applicable tax rate is 50%._____ is the tax effect of the loss.

Assume that the desired rate of return is 10% and that interest is compounded annually. Identify how much must be invested today to have $10,000 in 5 years and 10 years, respectively.

Lonesome Company, with pretax income of $80,000, is required to pay taxes of 25% on all income up to $20,000 and 35% on any income in excess of $20,000.Lonesome Company 's average tax rate is _____.

DCF methods are not based on the theory of compound interest.

An asset with a book value of $320,000 is sold at a $240,000 pre-tax gain in a year when the tax rate is 20%.A _____ is the tax effect of the gain.

At the current discount rate, the net present value of an 8-year project is zero.Assuming that the current discount rate and the annual cash flows are unchanged, identify which one of the following statements is true.

In relevant-cost analysis, the only pertinent overhead costs are those that _____.

The NPV method computes the present value of all expected future cash flows using a maximum desired rate of return.

The marginal tax rate is the _____.

The purposes of postaudits include all of the following except _____.

The cash outflow for the purchase of equipment is an example of an operating cash flow.

A capital-budgeting model that recognizes the value of contingent investments

If the appropriate tax rate is 40%, the after-tax effect of a $100,000 savings in labor cost is _____.

The _____ is not considered an outflow at time zero.

A company pays taxes of 25% on their first $25,000 of pretax income, and 40% on any taxable income in excess of $25,000.The marginal tax rate, if current pretax income is $30,000, is _____.

The method companies use to depreciate most assets under United States income tax laws

Because future inflation has no effect on the current purchase price of an asset, inflation factors can be ignored when capital-budgeting decisions are made.

The differential approach can be used to compare any number of projects.

When using the net?present?value method, if the sum of the present values of the cash flows is positive, then the _____.

Managerial Accounting, the Business Organization, and Professional Ethics

Introduction to Cost Behavior and Cost-Volume Relationships

Measurement of Cost Behavior

Cost Management Systems and an Introduction to Activity-Based Costing

Relevant Information and Decision Making With a Focus on Pricing Decisions

Relevant Information and Decision Making: Operational Decisions

Introduction to Budgets and Preparing the Master Budget

Flexible Budgets and Variance Analysis

Management Control Systems and Responsibility Accounting

Management Control in Decentralized Organizations

Cost Allocation

Accounting for Overhead Costs

Job-Costing and Process-Costing Systems

Basic Accounting: Concepts, Techniques, and Conventions

Understanding Corporate Annual Reports: Basic Financial Statements

Understanding and Analyzing Consolidated Financial Statements

Filters

Exam 11: Capital Budgeting

Discounted-cash-flow models focus on a project's cash inflows and cash outflows without regard to the time value of money.

An asset with a book value of $50,000 is sold at a loss before taxes are considered) of $20,000.The applicable tax rate is 50%._____ is the tax effect of the loss.

Assume that the desired rate of return is 10% and that interest is compounded annually. Identify how much must be invested today to have $10,000 in 5 years and 10 years, respectively.

Lonesome Company, with pretax income of $80,000, is required to pay taxes of 25% on all income up to $20,000 and 35% on any income in excess of $20,000.Lonesome Company 's average tax rate is _____.

DCF methods are not based on the theory of compound interest.

An asset with a book value of $320,000 is sold at a $240,000 pre-tax gain in a year when the tax rate is 20%.A _____ is the tax effect of the gain.

At the current discount rate, the net present value of an 8-year project is zero.Assuming that the current discount rate and the annual cash flows are unchanged, identify which one of the following statements is true.

In relevant-cost analysis, the only pertinent overhead costs are those that _____.

The NPV method computes the present value of all expected future cash flows using a maximum desired rate of return.

The marginal tax rate is the _____.

The purposes of postaudits include all of the following except _____.

The cash outflow for the purchase of equipment is an example of an operating cash flow.

A capital-budgeting model that recognizes the value of contingent investments

If the appropriate tax rate is 40%, the after-tax effect of a $100,000 savings in labor cost is _____.

The _____ is not considered an outflow at time zero.

A company pays taxes of 25% on their first $25,000 of pretax income, and 40% on any taxable income in excess of $25,000.The marginal tax rate, if current pretax income is $30,000, is _____.

The method companies use to depreciate most assets under United States income tax laws

Because future inflation has no effect on the current purchase price of an asset, inflation factors can be ignored when capital-budgeting decisions are made.

The differential approach can be used to compare any number of projects.

When using the net?present?value method, if the sum of the present values of the cash flows is positive, then the _____.

Managerial Accounting, the Business Organization, and Professional Ethics

Introduction to Cost Behavior and Cost-Volume Relationships

Measurement of Cost Behavior

Cost Management Systems and an Introduction to Activity-Based Costing

Relevant Information and Decision Making With a Focus on Pricing Decisions

Relevant Information and Decision Making: Operational Decisions

Introduction to Budgets and Preparing the Master Budget

Flexible Budgets and Variance Analysis

Management Control Systems and Responsibility Accounting

Management Control in Decentralized Organizations

Cost Allocation

Accounting for Overhead Costs

Job-Costing and Process-Costing Systems

Basic Accounting: Concepts, Techniques, and Conventions

Understanding Corporate Annual Reports: Basic Financial Statements

Understanding and Analyzing Consolidated Financial Statements

Filters