Exam 23: Planning for Capital Investments

A project with a zero net present value indicates that it is

The cash payback technique

Using the profitability index method, the present value of cash inflows for Project Flower is $88,000 and the present value of cash inflows of Project Plant is $48,000. If Project Flower and Project Plant require initial investments of $90,000 and $40,000, respectively, and have the same useful life, the project that should be accepted is

A company's discount rate is based on the

The payback period is often compared to an asset's

The rate that a company must pay to obtain funds from creditors and stockholders is known as the

If project A has a lower internal rate of return than project B, then project A will have a

The first step in the capital budgeting evaluation process is to

Benaflek Co. purchased some equipment 3 years ago. The company's required rate of return is 12%, and the net present value of the project was $(1,800). Annual cost savings were: $20,000 for year 1; $16,000 for year 2; and $12,000 for year 3. The amount of the initial investment was Present Value PV of an Annuity Year of 1 at 12\% of 1 at 12\% 1 .893 .893 2 .797 1.690 3 .712 2.402

Giraldi Company has identified that the cost of a new computer will be $48,000, but with the use of the new computer, net income will increase by $5,000 a year. If depreciation expense is $3,000 a year, the cash payback period is:

The discount rate is referred to by all of the following alternative names except the

Which of the following will increase the net present value of a project?

If the internal rate of return is less than the discount rate, then the net present value of a project is

A project that cost $80,000 with a useful life of 5 years is being considered. Straight-line depreciation is being used and salvage value is $5,000. The project will generate annual cash flows of $21,375. The annual rate of return is

Bark Company is considering buying a machine for $240,000 with an estimated life of ten years and no salvage value. The straight-line method of depreciation will be used. The machine is expected to generate net income of $6,000 each year. The cash payback period on this investment is

One way of incorporating intangible benefits into the capital budgeting decision is to project conservative estimates of the value of the intangible benefits and include them in the NPV calculation.

Most of the capital budgeting methods use

Which of the following is not a capital budgeting decision?

A thorough evaluation of how well a project's actual performance matches the projections made when the project was proposed is called a

Which of the following will cause the internal rate of return to increase?