Question 1

The time it will take to recoup, in the form of cash inflows from operations, the initial dollars invested in a project is known as the:

Accepted Answer

A)  internal return period 
B)  accounting return period 
C)  accelerated recovery period 
D)  payback period 
A)  internal return period 
B)  accounting return period 
C)  accelerated recovery period 
D)  payback period

Question 2

The purposes of post- audits include all of the following except:

Accepted Answer

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

Question 3

If IRR > minimum desired rate of return, then NPV > 0.

Accepted Answer

A) True 
 B)False

Question 4

Identify which one of the following statements is true.

Accepted Answer

A)  Predictions of cash flows and discount rates should be computed without regard to inflation. 
B)  When two projects are mutually exclusive, the project that has the smallest net present value should be undertaken. 
C)  If alternate projects have unequal lives, comparisons may be made over the useful life of either the longer- lived project or the shorter- lived one. 
D)  Comparisons between alternatives are best made without considering tax effects. 
A)  Predictions of cash flows and discount rates should be computed without regard to inflation. 
B)  When two projects are mutually exclusive, the project that has the smallest net present value should be undertaken. 
C)  If alternate projects have unequal lives, comparisons may be made over the useful life of either the longer- lived project or the shorter- lived one. 
D)  Comparisons between alternatives are best made without considering tax effects.

Question 5

Quoted market interest rate that includes an inflation element

Accepted Answer

The answer of Quoted market interest rate that includes an...

Question 6

is a nondiscounted- cash- flows model that has profitability as an objective.

Accepted Answer

A)  Payback 
B)  Internal rate of return 
C)  Net present value 
D)  Accounting rate of return 
A)  Payback 
B)  Internal rate of return 
C)  Net present value 
D)  Accounting rate of return

Question 7

The automatic rejection of one investment upon the acceptance of another investment is the definition of:

Accepted Answer

A)  inflation 
B)  mutually exclusive investments 
C)  unequal time periods 
D)  differential analysis 
A)  inflation 
B)  mutually exclusive investments 
C)  unequal time periods 
D)  differential analysis

Question 8

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

Accepted Answer

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

Question 9

Under the NPV method, the higher the risk of a project, the lower the desired rate of return.

Accepted Answer

A) True 
 B)False

Question 10

Harvey has offered to give you $10,000 today or $3,000 per year for the next five years. If the cost of capital is 10%, Harvey should:

Accepted Answer

A)  choose $3,000 for five years 
B)  choose $10,000 today 
C)  choose either because the results will be the same 
D)  Do nothing. Harvey cannot make a decision with the above information. 
A)  choose $3,000 for five years 
B)  choose $10,000 today 
C)  choose either because the results will be the same 
D)  Do nothing. Harvey cannot make a decision with the above information.

Question 11

When using the net- present- value method, if the sum of the present values of the cash flows is positive, then:

Accepted Answer

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

Question 12

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

Accepted Answer

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

Question 13

An annuity is:

Accepted Answer

A)  a yearly payment of any amount 
B)  a cash amount received only once 
C)  a series of equal cash flows at equal intervals 
D)  None of these answers is correct. 
A)  a yearly payment of any amount 
B)  a cash amount received only once 
C)  a series of equal cash flows at equal intervals 
D)  None of these answers is correct.

Question 14

Errors in forecasting terminal disposal values are usually not crucial because the present value of these flows is small.

Accepted Answer

A) True 
 B)False

Question 15

The more sensitive to change a project is, the riskier it is.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

Modified a

Question 17

An asset with a book value of $200,000 is sold at a loss (before taxes are considered) of $40,000. If the applicable tax rate is 20%, is the tax effect of the loss.

Accepted Answer

A)  $8,000 cash outflow 
B)  $48,000 cash inflow 
C)  $8,000 cash inflow 
D)  $208,000 cash inflow 
A)  $8,000 cash outflow 
B)  $48,000 cash inflow 
C)  $8,000 cash inflow 
D)  $208,000 cash inflow

Question 18

A popular approach for comparing two or more alternatives, which can be used for any number of alternatives

Accepted Answer

Total proj

Question 19

is not a common way to recognize risk.

Accepted Answer

A)  Increasing expected cash outflows by an amount that depends on their risk 
B)  Reducing individual expected cash inflows by an amount that depends on their risk 
C)  Increasing the minimum desired rate of return for riskier projects 
D)  Increasing the expected life of riskier projects 
A)  Increasing expected cash outflows by an amount that depends on their risk 
B)  Reducing individual expected cash inflows by an amount that depends on their risk 
C)  Increasing the minimum desired rate of return for riskier projects 
D)  Increasing the expected life of riskier projects

Question 20

The annual income statement of Elgin Company shows the following items: $\begin{array} { l  }
 \text {Sales }&\$200,000 \
 \text { Total expens es (excluding depreciation)}& \$140,000\
 \text {Depreciation}&\$35,000 \
 \text { Average income tax rate}& 20\%\
\end{array}$
 Required:
Compute the following amounts (ignore present value considerations):
a. Net after- tax income
b. The annual amount of net after- tax cash flow solely from depreciation
c. Total net after- tax cash inflow from operations

Accepted Answer

a. ($200,000 - $140,000 - $35,

The time it will take to recoup, in the form of cash inflows from operations, the initial dollars invested in a project is known as the:

The purposes of post- audits include all of the following except:

If IRR > minimum desired rate of return, then NPV > 0.

Identify which one of the following statements is true.

Quoted market interest rate that includes an inflation element

is a nondiscounted- cash- flows model that has profitability as an objective.

The automatic rejection of one investment upon the acceptance of another investment is the definition of:

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

Under the NPV method, the higher the risk of a project, the lower the desired rate of return.

Harvey has offered to give you $10,000 today or $3,000 per year for the next five years. If the cost of capital is 10%, Harvey should:

When using the net- present- value method, if the sum of the present values of the cash flows is positive, then:

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

An annuity is:

Errors in forecasting terminal disposal values are usually not crucial because the present value of these flows is small.

The more sensitive to change a project is, the riskier it is.

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

An asset with a book value of $200,000 is sold at a loss (before taxes are considered) of $40,000. If the applicable tax rate is 20%, is the tax effect of the loss.

A popular approach for comparing two or more alternatives, which can be used for any number of alternatives

is not a common way to recognize risk.

Managerial Accounting and the Business Organization

Introduction to Cost Behavior and Cost Volume Relationships

Measurement of Cost Behavior

Cost Management Systems and Activity-Based Costing

Relevant Information and Decision-Making: Marketing Decisions

Relevant Information and Decision-Making: Product Decisions

The Master Budget

Flexible Budget and Variance Analysis

Management Control Systems and Responsibility Accounting

Management Control in Decentralized Organizations

Cost Allocation

Job-Costing

Process-Costing Systems

Overhead Application: Variable and Absorbtion Costing

Basic Accounting Concepts, Techniques, and Conventions

Understanding Corporate Annual Reports: Basic Financial Statements

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Exam 11: Capital Budgeting

The time it will take to recoup, in the form of cash inflows from operations, the initial dollars invested in a project is known as the:

The purposes of post- audits include all of the following except:

If IRR > minimum desired rate of return, then NPV > 0.

Identify which one of the following statements is true.

Quoted market interest rate that includes an inflation element

is a nondiscounted- cash- flows model that has profitability as an objective.

The automatic rejection of one investment upon the acceptance of another investment is the definition of:

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

Under the NPV method, the higher the risk of a project, the lower the desired rate of return.

Harvey has offered to give you $10,000 today or $3,000 per year for the next five years. If the cost of capital is 10%, Harvey should:

When using the net- present- value method, if the sum of the present values of the cash flows is positive, then:

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

An annuity is:

Errors in forecasting terminal disposal values are usually not crucial because the present value of these flows is small.

The more sensitive to change a project is, the riskier it is.

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

An asset with a book value of $200,000 is sold at a loss (before taxes are considered) of $40,000. If the applicable tax rate is 20%, is the tax effect of the loss.

A popular approach for comparing two or more alternatives, which can be used for any number of alternatives

is not a common way to recognize risk.

Managerial Accounting and the Business Organization

Introduction to Cost Behavior and Cost Volume Relationships

Measurement of Cost Behavior

Cost Management Systems and Activity-Based Costing

Relevant Information and Decision-Making: Marketing Decisions

Relevant Information and Decision-Making: Product Decisions

The Master Budget

Flexible Budget and Variance Analysis

Management Control Systems and Responsibility Accounting

Management Control in Decentralized Organizations

Cost Allocation

Job-Costing

Process-Costing Systems

Overhead Application: Variable and Absorbtion Costing

Basic Accounting Concepts, Techniques, and Conventions

Understanding Corporate Annual Reports: Basic Financial Statements

Filters