Jordan Company is considering the purchase of a machine with the following data: \[\begin{array} { l r } \text { Initial cost } & \$ 150,000 \\ \text { One-time training cost } & 12,000 \\ \text { Annual maintenance costs } & 15,000 \\ \text { Annual cost savings } & 75,000 \\ \text { Salvage value } & 20,000 \end{array}\] The cash payback period is

A) 2.70 years. B) 2.50 years. C) 2.37 years. D) 2.17 years. A) 2.70 years. B) 2.50 years. C) 2.37 years. D) 2.17 years.

Use the following information for questions Carr Company is considering two capital investment proposals. Estimates regarding each project are provided below: $\begin{array}{lrr}&\text { Project Soup }&\text { Project Nuts }\\ \text { Initial investment } & \$ 400,000 & \$ 600,000 \\ \text { Annual net income } & 30,000 & 46,000 \\ \text { Net annual cash inflow } & 110,000 & 146,000 \\ \text { Estimated useful life } & 5 \text { years } & 6 \text { years } \\ \text { Salvage value } & -0- & -0- \end{array}$ The company requires a 10% rate of return on all new investments. $\text { Present Value of an Annuity of } 1$ $\begin{array}{rrrr}\text { Periods }&9\%&10\%&11\%&12\%\\ 5 & 3.890 & 3.791 & 3.696 & 3.605 \\ 6 & 4.486 & 4.355 & 4.231 & 4.111 \end{array}$ -The cash payback period for Project Nuts is

A) 13.3 years. B) 6.7 years. C) 5.0 years. D) 4.1 years. A) 13.3 years. B) 6.7 years. C) 5.0 years. D) 4.1 years.

Use the following information for questions Carr Company is considering two capital investment proposals. Estimates regarding each project are provided below: $\begin{array}{lrr}&\text { Project Soup }&\text { Project Nuts }\\ \text { Initial investment } & \$ 400,000 & \$ 600,000 \\ \text { Annual net income } & 30,000 & 46,000 \\ \text { Net annual cash inflow } & 110,000 & 146,000 \\ \text { Estimated useful life } & 5 \text { years } & 6 \text { years } \\ \text { Salvage value } & -0- & -0- \end{array}$ The company requires a 10% rate of return on all new investments. $\text { Present Value of an Annuity of } 1$ $\begin{array}{rrrr}\text { Periods }&9\%&10\%&11\%&12\%\\ 5 & 3.890 & 3.791 & 3.696 & 3.605 \\ 6 & 4.486 & 4.355 & 4.231 & 4.111 \end{array}$ -The annual rate of return for Project Soup is

A) 7.5%. B) 15.0%. C) 27.5%. D) 55%. A) 7.5%. B) 15.0%. C) 27.5%. D) 55%.

Exam 12: Statement of Cash Flows

A project has annual income exclusive of depreciation of $80,000.The annual rate of return is 15% and annual depreciation is $20,000.There is no salvage value.The internal rate of return is 12%.The initial cost of the project was

(Multiple Choice)

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Question 61

Use the following information for questions Cleaners, Inc. is considering purchasing equipment costing $60,000 with a 6-year useful life. The equipment will provide cost savings of $14,600 and will be depreciated straight-line over its useful life with no salvage value. Cleaners requires a 10% rate of return. $\text { Present Value of an Annuity of } 1$ Period 8\% 9\% 10\% 11\% 12\% 15\% 6 4.623 4.486 4.355 4.231 4.111 3.784 -What is the approximate net present value of this investment?

(Multiple Choice)

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Question 62

If a project costing $40,000 has a profitability index of 1.00 and the discount rate was 8%, then the project's internal rate of return was

(Multiple Choice)

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Question 63

The cash payback period is computed by dividing the cost of the capital investment by the net annual cash inflow.

(True/False)

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Question 64

Which of the following ignores the time value of money?

(Multiple Choice)

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Question 65

The cash payback technique

(Multiple Choice)

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Question 66

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

(Multiple Choice)

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Question 67

The cost of capital is a weighted average of the rates paid on borrowed funds, as well as on funds provided by investors in the company's stock.

(True/False)

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Question 68

Jordan Company is considering the purchase of a machine with the following data: Initial cost \ 150,000 One-time training cost 12,000 Annual maintenance costs 15,000 Annual cost savings 75,000 Salvage value 20,000 The cash payback period is

(Multiple Choice)

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Question 69

A post-audit is an evaluation of how well a project's actual performance matches the projections made when the project was proposed.

(True/False)

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Question 70

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

(Multiple Choice)

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Question 71

Most of the capital budgeting methods use

(Multiple Choice)

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Question 72

Use the following information for questions Carr Company is considering two capital investment proposals. Estimates regarding each project are provided below: Project Soup Project Nuts Initial investment \ 400,000 \ 600,000 Annual net income 30,000 46,000 Net annual cash inflow 110,000 146,000 Estimated useful life 5 years 6 years Salvage value -0- -0- The company requires a 10% rate of return on all new investments. $\text { Present Value of an Annuity of } 1$ Periods 9\% 10\% 11\% 12\% 5 3.890 3.791 3.696 3.605 6 4.486 4.355 4.231 4.111 -The cash payback period for Project Nuts is

(Multiple Choice)

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Question 73

A post-audit should be performed using

(Multiple Choice)

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Question 74

The discount rate that will result in the highest net present value for a project is

(Multiple Choice)

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Question 75

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

(Multiple Choice)

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Question 76

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

(Multiple Choice)

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Question 77

Use the following information for questions Carr Company is considering two capital investment proposals. Estimates regarding each project are provided below: Project Soup Project Nuts Initial investment \ 400,000 \ 600,000 Annual net income 30,000 46,000 Net annual cash inflow 110,000 146,000 Estimated useful life 5 years 6 years Salvage value -0- -0- The company requires a 10% rate of return on all new investments. $\text { Present Value of an Annuity of } 1$ Periods 9\% 10\% 11\% 12\% 5 3.890 3.791 3.696 3.605 6 4.486 4.355 4.231 4.111 -The annual rate of return for Project Soup is

(Multiple Choice)

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Question 78

The interest yield of a project is a rate that will cause the present value of the proposed capital expenditure to equal the present value of the expected annual cash inflows.

(True/False)

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Question 79

If the internal rate of return is used as the discount rate in the net present value calcula-tion, the net present value will be

(Multiple Choice)

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Question 80

A project has annual income exclusive of depreciation of $80,000.The annual rate of return is 15% and annual depreciation is $20,000.There is no salvage value.The internal rate of return is 12%.The initial cost of the project was

If a project costing $40,000 has a profitability index of 1.00 and the discount rate was 8%, then the project's internal rate of return was

The cash payback period is computed by dividing the cost of the capital investment by the net annual cash inflow.

Which of the following ignores the time value of money?

The cash payback technique

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

The cost of capital is a weighted average of the rates paid on borrowed funds, as well as on funds provided by investors in the company's stock.

Jordan Company is considering the purchase of a machine with the following data: Initial cost \ 150,000 One-time training cost 12,000 Annual maintenance costs 15,000 Annual cost savings 75,000 Salvage value 20,000 The cash payback period is

A post-audit is an evaluation of how well a project's actual performance matches the projections made when the project was proposed.

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

Most of the capital budgeting methods use

A post-audit should be performed using

The discount rate that will result in the highest net present value for a project is

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

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

The interest yield of a project is a rate that will cause the present value of the proposed capital expenditure to equal the present value of the expected annual cash inflows.

If the internal rate of return is used as the discount rate in the net present value calcula-tion, the net present value will be

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

Merchandising Operations and the Multiple-Step Income Statement

Reporting and Analyzing Inventory

Fraud, Internal Control, and Cash

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities

Reporting and Analyzing Stockholders Equity

Financial Analysis: the Big Picture

Managerial Accounting

Time Value of Money

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