Question 1

In the "Identify projects" stage of capital budgeting, companies gather information from all parts of the value chain to evaluate alternative projects.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following methods is described as the method that measures the time it will take to recoup, in the form of future cash inflows, the total dollars invested in a project?

Accepted Answer

A)  the accrued accounting rate-of-return method 
B)  the payback method 
C)  the internal rate-of-return method 
D)  the book-value method 
A)  the accrued accounting rate-of-return method 
B)  the payback method 
C)  the internal rate-of-return method 
D)  the book-value method

Question 3

NPV methods can be used to estimate the present value of a customer to a business so that strategic decisions can be made to retain customers and lower churn rates.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following involves the process of making decisions for significant financial investments in projects to develop new products, expand production capacity, or remodel current production facilities?

Accepted Answer

A)  capital budgeting 
B)  working capital management 
C)  master budgeting 
D)  capitalization 
A)  capital budgeting 
B)  working capital management 
C)  master budgeting 
D)  capitalization

Question 5

Depreciation results in income tax cash savings that are equal to the depreciation expense multiplied by the company's income tax rate.

Accepted Answer

A) True 
 B)False

Question 6

Accrual accounting rate of return is calculated by dividing increase in expected average annual after-tax operating income by the net initial investment.

Accepted Answer

A) True 
 B)False

Question 7

Forge Company wants to purchase a new cutting machine for its sewing plant. The investment is expected to generate annual cash inflows of $140,000. The required rate of return is 10% and the current machine is expected to last for seven years. Of the following choices, which is the dollar amount the company would be willing to spend for the machine, assuming its life is also seven years? Income taxes are not considered.

Accepted Answer

A)  $1,328,180 
B)  $882,000 
C)  $702,660 
D)  $681,520 
A)  $1,328,180 
B)  $882,000 
C)  $702,660 
D)  $681,520

Question 8

Which of the following methods of capital budgeting divides the average annual accrual accounting income of a project by a measure of the investment in it?

Accepted Answer

A)  net present value 
B)  internal rate of return 
C)  payback method 
D)  accrual accounting rate of return 
A)  net present value 
B)  internal rate of return 
C)  payback method 
D)  accrual accounting rate of return

Question 9

Post-investment audits ________.

Accepted Answer

A)  result in managers to overstate the expected cash inflows from projects and accept projects they should reject 
B)  provide management with feedback about the performance of a project 
C)  include obtaining appropriation requests so that the funding will be authorized to purchase the equipment 
D)  are usually not feasible in a large project because the cost accounting system does not collect actual costs at the same level of detail as the initial plans had 
A)  result in managers to overstate the expected cash inflows from projects and accept projects they should reject 
B)  provide management with feedback about the performance of a project 
C)  include obtaining appropriation requests so that the funding will be authorized to purchase the equipment 
D)  are usually not feasible in a large project because the cost accounting system does not collect actual costs at the same level of detail as the initial plans had

Question 10

Gavin and Alex, baseball consultants, are in need of a microcomputer network for their staff. They have received three proposals, with related facts as follows:
   
The company uses straight-line depreciation for all capital assets.
Required:
a.Compute the payback period, net present value, and accrual accounting rate of return with initial investment, for each proposal. Use a required rate of return of 14%.
b.Rank each proposal 1, 2, and 3 using each method separately. Which proposal is best? Why?

Accepted Answer

a.
Payback Method
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 @#IMG-DLM& 
 @#IMG-DLM& 
Net Present V

Question 11

Which of the following methods is described as follows: "It calculates the expected monetary gain or loss from a project by discounting all expected future cash inflows and outflows to the present point in time using the required rate of return"?

Accepted Answer

A)  payback method 
B)  accrual accounting rate-of-return method 
C)  internal rate of return 
D)  net present value method 
A)  payback method 
B)  accrual accounting rate-of-return method 
C)  internal rate of return 
D)  net present value method

In the "Identify projects" stage of capital budgeting, companies gather information from all parts of the value chain to evaluate alternative projects.

Which of the following methods is described as the method that measures the time it will take to recoup, in the form of future cash inflows, the total dollars invested in a project?

NPV methods can be used to estimate the present value of a customer to a business so that strategic decisions can be made to retain customers and lower churn rates.

Which of the following involves the process of making decisions for significant financial investments in projects to develop new products, expand production capacity, or remodel current production facilities?

Depreciation results in income tax cash savings that are equal to the depreciation expense multiplied by the company's income tax rate.

Accrual accounting rate of return is calculated by dividing increase in expected average annual after-tax operating income by the net initial investment.

Which of the following methods of capital budgeting divides the average annual accrual accounting income of a project by a measure of the investment in it?

Post-investment audits ________.

Which of the following methods is described as follows: "It calculates the expected monetary gain or loss from a project by discounting all expected future cash inflows and outflows to the present point in time using the required rate of return"?

The Manager and Management Accounting

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets, Direct-Cost Variances, and Management Control

Flexible Budgets, Overhead Cost Variances, and Management Control

Inventory Costing and Capacity Analysis

Determining How Costs Behave

Decision Making and Relevant Information

Strategy, Balanced Scorecard, and Strategic Profitability Analysis

Pricing Decisions and Cost Management

Cost Allocation, Customer-Profitability Analysis, and Sales-Variance Analysis

Allocation of Support-Department Costs, Common Costs, and Revenues

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, Rework, and Scrap

Balanced Scorecard: Quality and Time

Inventory Management, Just-in-Time, and Simplified Costing Methods

Management Control Systems, Transfer Pricing, and Multinational Considerations

Performance Measurement, Compensation, and Multinational Considerations

Filters

Exam 21: Capital Budgeting and Cost Analysis

In the "Identify projects" stage of capital budgeting, companies gather information from all parts of the value chain to evaluate alternative projects.

Which of the following methods is described as the method that measures the time it will take to recoup, in the form of future cash inflows, the total dollars invested in a project?

NPV methods can be used to estimate the present value of a customer to a business so that strategic decisions can be made to retain customers and lower churn rates.

Which of the following involves the process of making decisions for significant financial investments in projects to develop new products, expand production capacity, or remodel current production facilities?

Depreciation results in income tax cash savings that are equal to the depreciation expense multiplied by the company's income tax rate.

Accrual accounting rate of return is calculated by dividing increase in expected average annual after-tax operating income by the net initial investment.

Which of the following methods of capital budgeting divides the average annual accrual accounting income of a project by a measure of the investment in it?

Post-investment audits ________.

Which of the following methods is described as follows: "It calculates the expected monetary gain or loss from a project by discounting all expected future cash inflows and outflows to the present point in time using the required rate of return"?

The Manager and Management Accounting

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets, Direct-Cost Variances, and Management Control

Flexible Budgets, Overhead Cost Variances, and Management Control

Inventory Costing and Capacity Analysis

Determining How Costs Behave

Decision Making and Relevant Information

Strategy, Balanced Scorecard, and Strategic Profitability Analysis

Pricing Decisions and Cost Management

Cost Allocation, Customer-Profitability Analysis, and Sales-Variance Analysis

Allocation of Support-Department Costs, Common Costs, and Revenues

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, Rework, and Scrap

Balanced Scorecard: Quality and Time

Inventory Management, Just-in-Time, and Simplified Costing Methods

Management Control Systems, Transfer Pricing, and Multinational Considerations

Performance Measurement, Compensation, and Multinational Considerations

Filters