Question 1

Jimbob Co.is considering two alternatives to replace a delivery truck.The following data have been gathered concerning these two alternatives:

Accepted Answer

@#IMG-DLM& 
Jimbob Co.uses a 10% discount rate and

Question 2

General Manufacturing Company consists of several divisions,one of which is the Transportation Division.The company has decided to dispose of this division since it no longer fits the company's long-term strategy.An offer of $9,000,000 has been received from a prospective buyer.If General retained the division,the company would operate the division for only nine years,after which the division would no longer be needed and would be sold for $600,000.If the company retains the division,an immediate investment of $500,000 would need to be made to update equipment to current standards.Annual net operating cash flows would be $1,805,000 if the division is retained.The company's discount rate is 12%.
Required:
Using the net present value method,determine whether General Manufacturing should accept or reject the offer made by the potential buyer.

Accepted Answer

@#IMG-DLM& The sales price of $9,000,000

Question 3

What is the amount of the difference in the net present values of the costs of these alternatives closest to?

Accepted Answer

A)  $46,520. 
B)  $51,190. 
C)  $58,020. 
D)  $64,850. 
A)  $46,520. 
B)  $51,190. 
C)  $58,020. 
D)  $64,850.

Question 4

The payback period is:

Accepted Answer

A)  2.50 years. 
B)  2.75 years. 
C)  3.00 years. 
D)  5.00 years. 
A)  2.50 years. 
B)  2.75 years. 
C)  3.00 years. 
D)  5.00 years.

Question 5

The Jason Company is considering the purchase of a machine that will increase revenues by $32,000 each year.Cash outflows for operating this machine will be $6,000 each year.The cost of the machine is $65,000.It is expected to have a useful life of five years with no salvage value.For this machine,the simple rate of return is:

Accepted Answer

A)  9.2%. 
B)  20%. 
C)  40%. 
D)  49.2%. 
A)  9.2%. 
B)  20%. 
C)  40%. 
D)  49.2%.

Question 6

The net present value on this investment is closest to:

Accepted Answer

A)  $76,750. 
B)  $80,000. 
C)  $91,600. 
D)  $400,000. 
A)  $76,750. 
B)  $80,000. 
C)  $91,600. 
D)  $400,000.

Question 7

Preference decisions in capital budgeting involve selecting from alternative projects that have already be determined as acceptable investments.

Accepted Answer

A) True 
 B)False

Question 8

In comparing these two alternatives,which is the correct evaluation?

Accepted Answer

A)  Machine A should be purchased as the net present value of the costs of this alternative is the lowest. 
B)  Machine A should be purchased as the net present value of the costs of this alternative is the highest. 
C)  Machine B should be purchased as the net present value of the costs of this alternative is the lowest. 
D)  Machine B should be purchased as the net present value of the costs of this alternative is the highest. 
A)  Machine A should be purchased as the net present value of the costs of this alternative is the lowest. 
B)  Machine A should be purchased as the net present value of the costs of this alternative is the highest. 
C)  Machine B should be purchased as the net present value of the costs of this alternative is the lowest. 
D)  Machine B should be purchased as the net present value of the costs of this alternative is the highest.

Question 9

Kelcom Consultancy is considering an investment that requires an outlay of $200,000 and promises $231,023 of cash inflow one year from now.The company's cost of capital is 10%.
Compute the NPV of the investment.

Accepted Answer

The answer of Kelcom Consultancy is considering an investment that...

Question 10

The payback period would be closest to:

Accepted Answer

A)  2.9 years. 
B)  3.0 years. 
C)  3.33 years. 
D)  8.0 years. 
A)  2.9 years. 
B)  3.0 years. 
C)  3.33 years. 
D)  8.0 years.

Question 11

Jim Bingham is considering starting a small catering business.He would need to purchase a delivery van and various equipment costing $125,000 to equip the business and another $60,000 for inventories and other working capital needs.Rent for the building used by the business will be $35,000 per year.Jim's marketing studies indicate that the annual cash inflow from the business will amount to $120,000.In addition to the building rent,annual cash outflow for operating costs will amount to $40,000.Jim wants to operate the catering business for only six years.He estimates that the equipment could be sold at that time for 4% of its original cost.The working capital will be fully released for other purposes at the end of the six years.Jim uses a 16% discount rate.
Required:
Would you advise Jim to make this investment?

Accepted Answer

@#IMG-DLM& Yes,Jim should make

Question 12

The nominal cost of capital does not include a factor for expected inflation.

Accepted Answer

A) True 
 B)False

Question 13

The present value of the net cash flows (all cash inflows less all cash outflows)occurring during year 6 is closest to:

Accepted Answer

A)  $107,200. 
B)  $152,300. 
C)  $195,900. 
D)  $270,000. 
A)  $107,200. 
B)  $152,300. 
C)  $195,900. 
D)  $270,000.

Question 14

After-tax cash flows are computed as equal to pre-tax cash flows X (1 + tax rate).

Accepted Answer

A) True 
 B)False

Question 15

A company with $800,000 in operating assets is considering the purchase of a machine that costs $75,000 and which is expected to reduce operating costs by $20,000 each year.The payback period for this machine in years is closest to:

Accepted Answer

A)  0.27 years. 
B)  3.75 years. 
C)  10.7 years. 
D)  40 years. 
A)  0.27 years. 
B)  3.75 years. 
C)  10.7 years. 
D)  40 years.

Question 16

Parks Company is considering an investment proposal in which a working capital investment of $10,000 would be required.The investment would provide cash inflows of $2,000 per year for six years.The working capital would be released for use elsewhere when the project is completed.If the company's discount rate is 10%,the investment's net present value is:

Accepted Answer

A)  ($1,290). 
B)  $1,290. 
C)  $2,000. 
D)  $4,350. 
A)  ($1,290). 
B)  $1,290. 
C)  $2,000. 
D)  $4,350.

Question 17

The following data pertain to an investment proposal:   The net present value of the proposed investment is:

Accepted Answer

A)  $1,720. 
B)  $2,025. 
C)  $2,154. 
D)  $6,064. 
A)  $1,720. 
B)  $2,025. 
C)  $2,154. 
D)  $6,064.

Question 18

The net present value of this investment would be?

Accepted Answer

A)  ($14,350). 
B)  $77,200. 
C)  $107,250. 
D)  $200,000. 
A)  ($14,350). 
B)  $77,200. 
C)  $107,250. 
D)  $200,000.

Question 19

What is the simple rate of return on the initial investment?

Accepted Answer

A)  16%. 
B)  24%. 
C)  28%. 
D)  36%. 
A)  16%. 
B)  24%. 
C)  28%. 
D)  36%.

Question 20

An increase in the discount rate will result in an increase in the present value of a given cash flow.

Accepted Answer

A) True 
 B)False

Jimbob Co.is considering two alternatives to replace a delivery truck.The following data have been gathered concerning these two alternatives:

What is the amount of the difference in the net present values of the costs of these alternatives closest to?

The payback period is:

The net present value on this investment is closest to:

Preference decisions in capital budgeting involve selecting from alternative projects that have already be determined as acceptable investments.

In comparing these two alternatives,which is the correct evaluation?

Kelcom Consultancy is considering an investment that requires an outlay of $200,000 and promises $231,023 of cash inflow one year from now.The company's cost of capital is 10%. Compute the NPV of the investment.

The payback period would be closest to:

The nominal cost of capital does not include a factor for expected inflation.

The present value of the net cash flows (all cash inflows less all cash outflows)occurring during year 6 is closest to:

After-tax cash flows are computed as equal to pre-tax cash flows X (1 + tax rate).

A company with $800,000 in operating assets is considering the purchase of a machine that costs $75,000 and which is expected to reduce operating costs by $20,000 each year.The payback period for this machine in years is closest to:

The following data pertain to an investment proposal: The net present value of the proposed investment is:

The net present value of this investment would be?

What is the simple rate of return on the initial investment?

An increase in the discount rate will result in an increase in the present value of a given cash flow.

An Introduction to Managerial Accounting and Cost Concepts

Systems Design: Job-Order Costing

Systems Design: Activity-Based Costing

Systems Design: Process Costing

Cost Behavior: Analysis and Use

Cost-Volume-Profit Relationships

Profit Planning

Standard Costs

Flexible Budgets and Overhead Analysis

Relevant Costs for Decision Making

Capital Budgeting Decisions

How Well Am I Doing Statement of Cash Flows

How Well Am I Doing Financial Statement Analysis

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Exam 10: Decentralization

Jimbob Co.is considering two alternatives to replace a delivery truck.The following data have been gathered concerning these two alternatives:

What is the amount of the difference in the net present values of the costs of these alternatives closest to?

The payback period is:

The net present value on this investment is closest to:

Preference decisions in capital budgeting involve selecting from alternative projects that have already be determined as acceptable investments.

In comparing these two alternatives,which is the correct evaluation?

Kelcom Consultancy is considering an investment that requires an outlay of $200,000 and promises $231,023 of cash inflow one year from now.The company's cost of capital is 10%. Compute the NPV of the investment.

The payback period would be closest to:

The nominal cost of capital does not include a factor for expected inflation.

The present value of the net cash flows (all cash inflows less all cash outflows)occurring during year 6 is closest to:

After-tax cash flows are computed as equal to pre-tax cash flows X (1 + tax rate).

A company with $800,000 in operating assets is considering the purchase of a machine that costs $75,000 and which is expected to reduce operating costs by $20,000 each year.The payback period for this machine in years is closest to:

The following data pertain to an investment proposal: The net present value of the proposed investment is:

The net present value of this investment would be?

What is the simple rate of return on the initial investment?

An increase in the discount rate will result in an increase in the present value of a given cash flow.

An Introduction to Managerial Accounting and Cost Concepts

Systems Design: Job-Order Costing

Systems Design: Activity-Based Costing

Systems Design: Process Costing

Cost Behavior: Analysis and Use

Cost-Volume-Profit Relationships

Profit Planning

Standard Costs

Flexible Budgets and Overhead Analysis

Relevant Costs for Decision Making

Capital Budgeting Decisions

How Well Am I Doing Statement of Cash Flows

How Well Am I Doing Financial Statement Analysis

Filters