Question 1

Methods that ignore present value in capital investment analysis include the cash payback method.

Accepted Answer

A) True 
 B)False

Question 2

Periods experiencing increase in price levels are known as periods of:

Accepted Answer

A)  inflation. 
B)  recession. 
C)  depression. 
D)  deflation. 
A)  inflation. 
B)  recession. 
C)  depression. 
D)  deflation.

Question 3

Qualitative considerations are best evaluated using present value methods such as internal rate of return.

Accepted Answer

A) True 
 B)False

Question 4

A qualitative characteristic that influences capital investment analysis is manufacturing productivity.

Accepted Answer

A) True 
 B)False

Question 5

The excess of cash flowing in from revenues over the cash flowing out for expenses is termed net cash flow.

Accepted Answer

A) True 
 B)False

Question 6

A project analysis using the net present value method indicates that the present value of cash inflows is $120,000, and the total amount of investment required at the start of the project is $100,000.Which of the following statements best describes the results of the project analysis?

Accepted Answer

A)  The project should be accepted because the actual rate of return expected from the project is more than the minimum desired rate of return. 
B)  The project should be accepted because the actual rate of return expected from the project is less than the minimum desired rate of return. 
C)  The project should be rejected because the actual rate of return expected from the project is more than the minimum desired rate of return. 
D)  The project should be rejected because the actual rate of return expected from the project is less than the minimum desired rate of return. 
A)  The project should be accepted because the actual rate of return expected from the project is more than the minimum desired rate of return. 
B)  The project should be accepted because the actual rate of return expected from the project is less than the minimum desired rate of return. 
C)  The project should be rejected because the actual rate of return expected from the project is more than the minimum desired rate of return. 
D)  The project should be rejected because the actual rate of return expected from the project is less than the minimum desired rate of return.

Question 7

The anticipated purchase of a fixed asset for $400,000 with a useful life of 5 years and no residual value is expected to yield total income of $150,000 (recognition is given to the effect of straight-line depreciation on the investment).The expected average rate of return is 15%.

Accepted Answer

A) True 
 B)False

Question 8

Alpha Inc.is evaluating the purchase of a machine costing $350,000.The expected useful life of the machine is 5 years at the end which it would have no residual value, and the depreciation is assumed to be on straight-line basis.The estimated total income from the machine is $500,000.The expected average rate of return for this machine is:

Accepted Answer

A)  26.4%. 
B)  42.6%. 
C)  38.5%. 
D)  57.1%. 
A)  26.4%. 
B)  42.6%. 
C)  38.5%. 
D)  57.1%.

Question 9

Harris Co.is considering a 12-year project that is estimated to cost $900,000 and has no residual value.Harris seeks to earn an average rate of return of 15% on all capital projects.Determine the necessary average annual income (using straight-line depreciation) that must be achieved on this project for it to be acceptable to Harris Co.

Accepted Answer

The answer of Harris Co.is considering a 12-year project that...

Methods that ignore present value in capital investment analysis include the cash payback method.

Periods experiencing increase in price levels are known as periods of:

Qualitative considerations are best evaluated using present value methods such as internal rate of return.

A qualitative characteristic that influences capital investment analysis is manufacturing productivity.

The excess of cash flowing in from revenues over the cash flowing out for expenses is termed net cash flow.

A project analysis using the net present value method indicates that the present value of cash inflows is $120,000, and the total amount of investment required at the start of the project is $100,000.Which of the following statements best describes the results of the project analysis?

The anticipated purchase of a fixed asset for $400,000 with a useful life of 5 years and no residual value is expected to yield total income of $150,000 (recognition is given to the effect of straight-line depreciation on the investment).The expected average rate of return is 15%.

The Role of Accounting in Business

Basic Accounting Systems: Cash Basis

Basic Accounting Systems: Accrual Basis

Accounting for Merchandising Businesses

Internal Control and Cash

Receivables and Inventories

Fixed Assets, Natural Resources, and Intangible Assets

Liabilities and Stockholders Equity

Metric Analysis of Financial Statements

Accounting for Manufacturing Operations

Cost-Volume-Profit Analysis

Differential Analysis and Product Pricing

Budgeting and Standard Costs

Performance Evaluation for Decentralized Operations

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Exam 15: Capital Investment Analysis

Methods that ignore present value in capital investment analysis include the cash payback method.

Periods experiencing increase in price levels are known as periods of:

Qualitative considerations are best evaluated using present value methods such as internal rate of return.

A qualitative characteristic that influences capital investment analysis is manufacturing productivity.

The excess of cash flowing in from revenues over the cash flowing out for expenses is termed net cash flow.

A project analysis using the net present value method indicates that the present value of cash inflows is $120,000, and the total amount of investment required at the start of the project is $100,000.Which of the following statements best describes the results of the project analysis?

The anticipated purchase of a fixed asset for $400,000 with a useful life of 5 years and no residual value is expected to yield total income of $150,000 (recognition is given to the effect of straight-line depreciation on the investment).The expected average rate of return is 15%.

The Role of Accounting in Business

Basic Accounting Systems: Cash Basis

Basic Accounting Systems: Accrual Basis

Accounting for Merchandising Businesses

Internal Control and Cash

Receivables and Inventories

Fixed Assets, Natural Resources, and Intangible Assets

Liabilities and Stockholders Equity

Metric Analysis of Financial Statements

Accounting for Manufacturing Operations

Cost-Volume-Profit Analysis

Differential Analysis and Product Pricing

Budgeting and Standard Costs

Performance Evaluation for Decentralized Operations

Filters