Question 1

Which of the following is a method of analyzing capital investment proposals that ignores present value?

Accepted Answer

A)  internal rate of return 
B)  net present value 
C)  discounted cash flow 
D)  average rate of return 
A)  internal rate of return 
B)  net present value 
C)  discounted cash flow 
D)  average rate of return

Question 2

A $400,000 capital investment proposal has an estimated life of 4 years and no residual value. The estimated net cash flows are as follows:   
The minimum desired rate of return for net present value analysis is 12%. The present value of $1 at compound interest of 12% for 1, 2, 3, and 4 years is 0.893, 0.797, 0.712, and 0.636, respectively. 
Determine the net present value.

Accepted Answer

The answer of A $400,000 capital investment proposal has an...

Question 3

The methods of evaluating capital investment proposals can be separated into two general groups-present value methods and

Accepted Answer

A)  past value methods 
B)  straight-line methods 
C)  reducing value methods 
D)  methods that ignore present value 
A)  past value methods 
B)  straight-line methods 
C)  reducing value methods 
D)  methods that ignore present value

Question 4

If in evaluating a proposal by use of the net present value method there is a deficiency of the present value of future cash inflows over the amount to be invested, the proposal should be rejected.

Accepted Answer

A) True 
 B)False

Question 5

A project is estimated to cost $273,840 and provide annual net cash flows of $60,000 for 7 years. Determine the internal rate of return for this project, using the following present value of an annuity table.

Accepted Answer

12%  [($273,840/$60,

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

The management of River Corporation is considering the purchase of a new machine costing $380,000. The company's desired rate of return is 6%. The present value factor for an annuity of $1 at interest of 6% for 5 years is 4.212. In addition to the foregoing information, use the following data in determining the acceptability of this investment:   The cash payback period for this investment is

Accepted Answer

A)  4 years 
B)  5 years 
C)  20 years 
D)  3 years 
A)  4 years 
B)  5 years 
C)  20 years 
D)  3 years

Question 8

Dickerson Co. is evaluating a project requiring a capital expenditure of $810,000. The project has an estimated life of 4 years and no salvage value. The estimated net income and net cash flow from the project are as follows:   
The company's minimum desired rate of return is 12%. The present value of $1 at compound interest of 12% for 1, 2, 3, and 4 years is 0.893, 0.797, 0.712, and 0.636, respectively. 
Determine the net present value.

Accepted Answer

The answer of Dickerson Co. is evaluating a project requiring...

Question 9

A project has estimated annual net cash flows of $60,000. It is estimated to cost $240,000. Determine the cash payback period.

Accepted Answer

4 years ($

Question 10

The cash payback method of capital investment analysis is one of the methods referred to as a present value method.

Accepted Answer

A) True 
 B)False

Question 11

The expected average rate of return for a proposed investment of $650,000 in a fixed asset, with a useful life of 4 years, straight-line depreciation, no residual value, and an expected total net income of $240,000 for the 4 years, is

Accepted Answer

A)  13.9% 
B)  36.9% 
C)  18.5% 
D)  9.25% 
A)  13.9% 
B)  36.9% 
C)  18.5% 
D)  9.25%

Question 12

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 net income of $300,000 for the 5 years. The expected average rate of return is 37.5%.

Accepted Answer

A) True 
 B)False

Question 13

BAM Co. is evaluating a project requiring a capital expenditure of $806,250. The project has an estimated life of 4 years and no salvage value. The estimated net income and net cash flow from the project are as follows:   
The company's minimum desired rate of return is 12%. The present value of $1 at compound interest of 12% for 1, 2, 3, and 4 years is 0.893, 0.797, 0.712, and 0.636, respectively. 
Determine: 
(a) the average rate of return on investment, including the effect of depreciation on the investment, and 
(b) the net present value.

Accepted Answer

The answer of BAM Co. is evaluating a project requiring...

Question 14

The production department is proposing the purchase of an automatic insertion machine. It has identified 3 machines and has asked the accountant to analyze them to determine the best cash payback.

Accepted Answer

A)  Machine A 
B)  Machine C 
C)  Machine B 
D)  All are equal. 
A)  Machine A 
B)  Machine C 
C)  Machine B 
D)  All are equal.

Question 15

Below is a table for the present value of $1 at compound interest.  
Below is a table for the present value of an annuity of $1 at compound interest.  
Using the tables above, what would be the internal rate of return of an investment of $210,600 that would generate an annual cash inflow of $50,000 for the next 5 years?

Accepted Answer

A)  6% 
B)  10% 
C)  12% 
D)  14% 
A)  6% 
B)  10% 
C)  12% 
D)  14%

Question 16

Match between columns
                        Premises: Average income as a percentage of average investment
Often referred to as the discounted cash flow method
The length of time it will take to recover through cash inflows the dollars of a capital outlay
A formal means of analyzing long-range investment decisions
The process by which management allocates funds among various capital investment proposals
Can be determined by initial cost divided by annual net cash inflow of an investment
Uses present value concepts to compute the rate of return on an investment from a capital investment proposal based on its' expected net cash flows
Also referred to as capital budgeting
A measure of the average income as a percent of the average investment
A stream of equal cash flow amounts
Recognizes that a dollar today is worth more than a dollar tomorrow

Accepted Answer

The Answer of Average rate of return and Cash payback is...

Question 17

The management of Wyoming Corporation is considering the purchase of a new machine costing $375,000. The company's desired rate of return is 6%. The present value factor for an annuity of $1 at interest of 6% for 5 years is 4.212. In addition to the foregoing information, use the following data in determining the acceptability of this investment:   The net present value for this investment is

Accepted Answer

A)  $(118,145) 
B)  $118,145 
C)  $19,875 
D)  $(19,875) 
A)  $(118,145) 
B)  $118,145 
C)  $19,875 
D)  $(19,875)

Question 18

Which of the following can be used to place capital investment proposals involving different amounts of investment on a comparable basis for purposes of net present value analysis?

Accepted Answer

A)  price-level index 
B)  future value index 
C)  rate of investment index 
D)  present value index 
A)  price-level index 
B)  future value index 
C)  rate of investment index 
D)  present value index

Question 19

Which method for evaluating capital investment proposals reduces the expected future net cash flows originating from the proposals to their present values and computes a net present value?

Accepted Answer

A)  net present value 
B)  average rate of return 
C)  internal rate of return 
D)  cash payback 
A)  net present value 
B)  average rate of return 
C)  internal rate of return 
D)  cash payback

Question 20

An analysis of a proposal by the net present value method indicated that the present value of future cash inflows exceeded the amount to be invested. Which of the following statements best describes the results of this analysis?

Accepted Answer

A)  The proposal is desirable and the rate of return expected from the proposal exceeds the minimum rate used for the analysis. 
B)  The proposal is desirable and the rate of return expected from the proposal is less than the minimum rate used for the analysis. 
C)  The proposal is undesirable and the rate of return expected from the proposal is less than the minimum rate used for the analysis. 
D)  The proposal is undesirable and the rate of return expected from the proposal exceeds the minimum rate used for the analysis. 
A)  The proposal is desirable and the rate of return expected from the proposal exceeds the minimum rate used for the analysis. 
B)  The proposal is desirable and the rate of return expected from the proposal is less than the minimum rate used for the analysis. 
C)  The proposal is undesirable and the rate of return expected from the proposal is less than the minimum rate used for the analysis. 
D)  The proposal is undesirable and the rate of return expected from the proposal exceeds the minimum rate used for the analysis.

Which of the following is a method of analyzing capital investment proposals that ignores present value?

The methods of evaluating capital investment proposals can be separated into two general groups-present value methods and

If in evaluating a proposal by use of the net present value method there is a deficiency of the present value of future cash inflows over the amount to be invested, the proposal should be rejected.

A project is estimated to cost $273,840 and provide annual net cash flows of $60,000 for 7 years. Determine the internal rate of return for this project, using the following present value of an annuity table.

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

A project has estimated annual net cash flows of $60,000. It is estimated to cost $240,000. Determine the cash payback period.

The cash payback method of capital investment analysis is one of the methods referred to as a present value method.

The expected average rate of return for a proposed investment of $650,000 in a fixed asset, with a useful life of 4 years, straight-line depreciation, no residual value, and an expected total net income of $240,000 for the 4 years, is

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 net income of $300,000 for the 5 years. The expected average rate of return is 37.5%.

The production department is proposing the purchase of an automatic insertion machine. It has identified 3 machines and has asked the accountant to analyze them to determine the best cash payback.

Which of the following can be used to place capital investment proposals involving different amounts of investment on a comparable basis for purposes of net present value analysis?

Which method for evaluating capital investment proposals reduces the expected future net cash flows originating from the proposals to their present values and computes a net present value?

An analysis of a proposal by the net present value method indicated that the present value of future cash inflows exceeded the amount to be invested. Which of the following statements best describes the results of this analysis?

Introduction to Managerial Accounting

Job Order Costing

Process Cost Systems

Activity Based Costing

Cost Volume Profit Analysis

Variable Costing for Management Analysis

Budgeting

Evaluating Variances From Standard Costs

Evaluating Decentralized Operations

Differential Analysis and Product Pricing

Lean Manufacturing and Activity Analysis

Statement of Cash Flows

Financial Statement Analysis

Filters

Exam 11: Capital Investment Analysis

Which of the following is a method of analyzing capital investment proposals that ignores present value?

The methods of evaluating capital investment proposals can be separated into two general groups-present value methods and

If in evaluating a proposal by use of the net present value method there is a deficiency of the present value of future cash inflows over the amount to be invested, the proposal should be rejected.

A project is estimated to cost $273,840 and provide annual net cash flows of $60,000 for 7 years. Determine the internal rate of return for this project, using the following present value of an annuity table.

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

A project has estimated annual net cash flows of $60,000. It is estimated to cost $240,000. Determine the cash payback period.

The cash payback method of capital investment analysis is one of the methods referred to as a present value method.

The expected average rate of return for a proposed investment of $650,000 in a fixed asset, with a useful life of 4 years, straight-line depreciation, no residual value, and an expected total net income of $240,000 for the 4 years, is

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 net income of $300,000 for the 5 years. The expected average rate of return is 37.5%.

The production department is proposing the purchase of an automatic insertion machine. It has identified 3 machines and has asked the accountant to analyze them to determine the best cash payback.

Which of the following can be used to place capital investment proposals involving different amounts of investment on a comparable basis for purposes of net present value analysis?

Which method for evaluating capital investment proposals reduces the expected future net cash flows originating from the proposals to their present values and computes a net present value?

An analysis of a proposal by the net present value method indicated that the present value of future cash inflows exceeded the amount to be invested. Which of the following statements best describes the results of this analysis?

Introduction to Managerial Accounting

Job Order Costing

Process Cost Systems

Activity Based Costing

Cost Volume Profit Analysis

Variable Costing for Management Analysis

Budgeting

Evaluating Variances From Standard Costs

Evaluating Decentralized Operations

Differential Analysis and Product Pricing

Lean Manufacturing and Activity Analysis

Statement of Cash Flows

Financial Statement Analysis

Filters