Use the following table $\begin{array}{c} \underline{\text { Present Value of an Annuity of } 1}\\ \begin{array}{c} \underline{\text {Period}}\\ 1\\ 2\\ 3 \end{array} \begin{array}{c} \underline{8 \%}\\ .926 \\ 1.783 \\ 2.577 \end{array} \begin{array}{c} \underline{9 \%}\\ .917 \\ 1.759 \\ 2.531 \end{array} \begin{array}{c} \underline{10 \%}\\ .909 \\ 1.736 \\ 2.487 \end{array} \end{array}$ A company has a minimum required rate of return of 9%.It is considering investing in a project which costs $350000 and is expected to generate cash inflows of $140000 at the end of each year for three years.The net present value of this project is

A) $354340. B) $70000. C) $35436. D) $4340. A) $354340. B) $70000. C) $35436. D) $4340.

Bradshaw Inc.is contemplating a capital investment of $88000.The cash flows over the project's four years are: $\begin{array} { c c c } \text { Expected Annual } & \text { Expected Annual } & \\ \underline{\text { Year }} & \underline{ \text { Cash Inflows }} & \underline{\text { Cash Outflows }} \\ 1& \$ 30,000 & \$ 12,000 \\ 2 & 45,000 & 20,000 \\ 3 & 60,000 & 25,000 \\ 4& 50,000 & 30,000 \end{array}$ The cash payback period is

A) 3.59 years. B) 3.50 years. C) 2.37 years. D) 3.20 years. A) 3.59 years. B) 3.50 years. C) 2.37 years. D) 3.20 years.

Richman 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 $(900).Annual cost savings were: $10000 for year 1; $8000 for year 2; and $6000 for year 3.The amount of the initial investment was $\begin{array} { c c c } \underline{\text { Year } }& \begin{array} { c } \text { Present Value } \\ \underline{\text { of } 1 \text { at } 12 \%} \end{array} & \begin{array} { c } \text { PV of an Annuity } \\ \underline{\text { of } 1 \text { at } 12 \%} \end{array} \\ 1& .893 &.893 \\ 3 & .797 & 1.690 \\ 3 & .712 & 2.402 \end{array}$

A) $20478. B) $18316. C) $20116. D) $18678. A) $20478. B) $18316. C) $20116. D) $18678.

Exam 17: Cost-Volume Profit Analysis: Additional Issues

Giraldi Company has identified that the cost of a new computer will be $48000 but with the use of the new computer net income will increase by $5000 a year.If depreciation expense is $3000 a year the cash payback period is:

(Multiple Choice)

4.9/5

(95)

Question 61

In capital budgeting intangible benefits should be

(Multiple Choice)

4.8/5

(80)

Question 62

What is the approximate profitability index associated with this equipment?

(Multiple Choice)

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(82)

Question 63

If a project has a salvage value greater than zero the salvage value will

(Multiple Choice)

4.9/5

(85)

Question 64

A company has a minimum required rate of return of 9%.It is considering investing in a project that costs $210000 and is expected to generate cash inflows of $84000 at the end of each year for three years.The net present value of this project is

(Multiple Choice)

4.8/5

(88)

Question 65

Most of the capital budgeting methods use

(Multiple Choice)

4.8/5

(62)

Question 66

Use the following table 1 2 3 .926 1.783 2.577 .917 1.759 2.531 .909 1.736 2.487 A company has a minimum required rate of return of 9%.It is considering investing in a project which costs $350000 and is expected to generate cash inflows of $140000 at the end of each year for three years.The net present value of this project is

(Multiple Choice)

4.7/5

(94)

Question 67

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)

5.0/5

(79)

Question 68

Nance Company is considering buying a machine for $90000 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 $3000 each year.The cash payback on this investment is

(Multiple Choice)

4.9/5

(75)

Question 69

Bradshaw Inc.is contemplating a capital investment of $88000.The cash flows over the project's four years are: Expected Annual Expected Annual 1 \ 30,000 \ 12,000 2 45,000 20,000 3 60,000 25,000 4 50,000 30,000 The cash payback period is

(Multiple Choice)

4.9/5

(68)

Question 70

Net annual cash flow can be estimated by

(Multiple Choice)

4.8/5

(67)

Question 71

Using a number of outcome estimates to get a sense of the variability among potential returns is

(Multiple Choice)

4.9/5

(82)

Question 72

Richman 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 $(900).Annual cost savings were: $10000 for year 1; $8000 for year 2; and $6000 for year 3.The amount of the initial investment was Present Value PV of an Annuity 1 .893 .893 3 .797 1.690 3 .712 2.402

(Multiple Choice)

4.8/5

(70)

Question 73

A company's discount rate is based on the

(Multiple Choice)

4.8/5

(80)

Question 74

When using the cash payback technique the payback period is expressed in terms of

(Multiple Choice)

5.0/5

(80)

Question 75

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.

(True/False)

4.8/5

(74)

Question 76

The profitability index is computed by dividing the

(Multiple Choice)

4.9/5

(89)

Question 77

If a project has a negative net present value its profitability index will be

(Multiple Choice)

4.9/5

(78)

Question 78

The cash payback technique

(Multiple Choice)

4.9/5

(65)

Question 79

A major advantage of the annual rate of return method is that it considers the time value of money.

(True/False)

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(73)

Question 80

Giraldi Company has identified that the cost of a new computer will be $48000 but with the use of the new computer net income will increase by $5000 a year.If depreciation expense is $3000 a year the cash payback period is:

In capital budgeting intangible benefits should be

What is the approximate profitability index associated with this equipment?

If a project has a salvage value greater than zero the salvage value will

A company has a minimum required rate of return of 9%.It is considering investing in a project that costs $210000 and is expected to generate cash inflows of $84000 at the end of each year for three years.The net present value of this project is

Most of the capital budgeting methods use

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.

Nance Company is considering buying a machine for $90000 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 $3000 each year.The cash payback on this investment is

Bradshaw Inc.is contemplating a capital investment of $88000.The cash flows over the project's four years are: Expected Annual Expected Annual 1 \ 30,000 \ 12,000 2 45,000 20,000 3 60,000 25,000 4 50,000 30,000 The cash payback period is

Net annual cash flow can be estimated by

Using a number of outcome estimates to get a sense of the variability among potential returns is

A company's discount rate is based on the

When using the cash payback technique the payback period is expressed in terms of

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.

The profitability index is computed by dividing the

If a project has a negative net present value its profitability index will be

The cash payback technique

A major advantage of the annual rate of return method is that it considers the time value of money.

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

Fraud, Internal Control, and Cash

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities and Stockholders Equity

Financial Analysis: the Big Picture

Managerial Accounting

Cost-Volume-Profit

Incremental Analysis

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Planning for Capital Investments

Activity Based Costing

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