Question 1

The simple rate of return would be closest to:

Accepted Answer

A)  12.5%. 
B)  17.5%. 
C)  18.75%. 
D)  30.0%. 
A)  12.5%. 
B)  17.5%. 
C)  18.75%. 
D)  30.0%.

Question 2

White Company's required rate of return on capital budgeting projects is 12%.The company is considering an investment opportunity which would yield a cash flow of $10,000 in five years.What is the most that the company should be willing to invest in this project?

Accepted Answer

A)  $2,774. 
B)  $5,670. 
C)  $17,637. 
D)  $36,050. 
A)  $2,774. 
B)  $5,670. 
C)  $17,637. 
D)  $36,050.

Question 3

Bradley Company's required rate of return is 14%.The company has an opportunity to be the exclusive distributor of a very popular consumer item.No new equipment would be needed,but the company would have to use one-fourth of the space in a warehouse it owns.The warehouse cost $200,000 new.The warehouse is currently half-empty and there are no other plans to use the empty space.In addition,the company would have to invest $100,000 in working capital to carry inventories and accounts receivable for the new product line.The company would have the distributorship for only 5 years.The distributorship would generate a $17,000 net annual cash inflow.The working capital would be fully released at the end of the five years to be available for other purposes.
Required:
What is the net present value of the project at a discount rate of 14%? Should the project be accepted?

Accepted Answer

@#IMG-DLM& Yes,the distributor

Question 4

The following data pertain to an investment proposal:   The working capital would be released for use elsewhere when the project is completed.What is the net present value of the project,using a discount rate of 8%?

Accepted Answer

A)  ($251). 
B)  $251. 
C)  $2,566. 
D)  $5,251. 
A)  ($251). 
B)  $251. 
C)  $2,566. 
D)  $5,251.

Question 5

Projects with shorter payback periods are always more profitable than projects with longer payback periods.

Accepted Answer

A) True 
 B)False

Question 6

The cost of capital is the average rate of return a company must pay on its short-term bank borrowings.

Accepted Answer

A) True 
 B)False

Question 7

If the incremental cost approach rather than the total cost approach is used to evaluate alternatives,which statement below is true?

Accepted Answer

A)  The net book value of the present machine will become relevant to the analysis. 
B)  The College will reject both these alternatives as they both have negative net present values. 
C)  If the College chooses between these alternatives,the purchase of the new system will be selected. 
D)  The incremental cost approach would facilitate an easy comparison of these two alternatives with any others the College might decide to consider. 
A)  The net book value of the present machine will become relevant to the analysis. 
B)  The College will reject both these alternatives as they both have negative net present values. 
C)  If the College chooses between these alternatives,the purchase of the new system will be selected. 
D)  The incremental cost approach would facilitate an easy comparison of these two alternatives with any others the College might decide to consider.

Question 8

In comparing two investment alternatives,the difference between the net present values of the two alternatives obtained using the total cost approach will be the same as the net present value obtained using the incremental cost approach.

Accepted Answer

A) True 
 B)False

Question 9

What would the annual net cash inflows from this project have to be in order to justify investing in remodelling?

Accepted Answer

A)  $14,495. 
B)  $16,147. 
C)  $29,158. 
D)  $35,842. 
A)  $14,495. 
B)  $16,147. 
C)  $29,158. 
D)  $35,842.

Question 10

The net present value of the alternative of purchasing the new system is:

Accepted Answer

A)  ($1,236,495). 
B)  ($1,169,895). 
C)  ($1,076,495). 
D)  ($969,895). 
A)  ($1,236,495). 
B)  ($1,169,895). 
C)  ($1,076,495). 
D)  ($969,895).

Question 11

The payback method measures:

Accepted Answer

A)  how quickly investment dollars may be recovered. 
B)  the cash flow from an investment. 
C)  the economic life of an investment. 
D)  the profitability of an investment. 
A)  how quickly investment dollars may be recovered. 
B)  the cash flow from an investment. 
C)  the economic life of an investment. 
D)  the profitability of an investment.

Question 12

The discount rate used in net present value analysis should normally match or exceed the company's minimum required rate of return.

Accepted Answer

A) True 
 B)False

Question 13

The payback period for the investment would be:

Accepted Answer

A)  0.25 years. 
B)  2.41 years. 
C)  4 years. 
D)  10 years. 
A)  0.25 years. 
B)  2.41 years. 
C)  4 years. 
D)  10 years.

Question 14

One of the strengths of the simple rate of return method is that it takes into account the time value of money in computing the return on an investment project.

Accepted Answer

A) True 
 B)False

Question 15

The present value of a given sum to be received in five years will be exactly twice as great as the present value of an equal sum to be received in ten years.

Accepted Answer

A) True 
 B)False

Question 16

Buy-Rite Pharmacy has purchased a small auto for delivering prescriptions.The auto was purchased for $9,000 and will have a 6-year useful life and a $3,000 salvage value.Delivering prescriptions (which the pharmacy has never done before)should increase gross revenues by at least $5,000 per year.The cost of these prescriptions to the pharmacy will be about $2,000 per year.The pharmacy depreciates all assets using the straight-line method.The payback period for the auto is:

Accepted Answer

A)  1.2 years. 
B)  1.8 years. 
C)  2.0 years. 
D)  3.0 years. 
A)  1.2 years. 
B)  1.8 years. 
C)  2.0 years. 
D)  3.0 years.

Question 17

One of the strengths of the simple rate of return method is that it uses data about cash flows rather than accounting net income.

Accepted Answer

A) True 
 B)False

Question 18

In the simple rate of return method,depreciation expense is excluded from the calculation of incremental expenses.

Accepted Answer

A) True 
 B)False

Question 19

Given the following data:   Based on the data given,the annual cost savings would be:

Accepted Answer

A)  $1,630.00. 
B)  $2,123.89. 
C)  $2,200.00. 
D)  $2,553.89. 
A)  $1,630.00. 
B)  $2,123.89. 
C)  $2,200.00. 
D)  $2,553.89.

Question 20

Denny Corporation is considering replacing a technologically obsolete machine with a new state-of-the-art numerically controlled machine.The new machine would cost $450,000 and would have a ten-year useful life.Unfortunately,the new machine would have no salvage value.The new machine would cost $20,000 per year to operate and maintain,but would save $100,000 per year in labour and other costs.The old machine can be sold now for scrap for $50,000.The simple rate of return on the new machine is closest to:

Accepted Answer

A)  7.78%. 
B)  8.75%. 
C)  20.00%. 
D)  22.22%. 
A)  7.78%. 
B)  8.75%. 
C)  20.00%. 
D)  22.22%.

The simple rate of return would be closest to:

White Company's required rate of return on capital budgeting projects is 12%.The company is considering an investment opportunity which would yield a cash flow of $10,000 in five years.What is the most that the company should be willing to invest in this project?

The following data pertain to an investment proposal: The working capital would be released for use elsewhere when the project is completed.What is the net present value of the project,using a discount rate of 8%?

Projects with shorter payback periods are always more profitable than projects with longer payback periods.

The cost of capital is the average rate of return a company must pay on its short-term bank borrowings.

If the incremental cost approach rather than the total cost approach is used to evaluate alternatives,which statement below is true?

In comparing two investment alternatives,the difference between the net present values of the two alternatives obtained using the total cost approach will be the same as the net present value obtained using the incremental cost approach.

What would the annual net cash inflows from this project have to be in order to justify investing in remodelling?

The net present value of the alternative of purchasing the new system is:

The payback method measures:

The discount rate used in net present value analysis should normally match or exceed the company's minimum required rate of return.

The payback period for the investment would be:

One of the strengths of the simple rate of return method is that it takes into account the time value of money in computing the return on an investment project.

The present value of a given sum to be received in five years will be exactly twice as great as the present value of an equal sum to be received in ten years.

One of the strengths of the simple rate of return method is that it uses data about cash flows rather than accounting net income.

In the simple rate of return method,depreciation expense is excluded from the calculation of incremental expenses.

Given the following data: Based on the data given,the annual cost savings would be:

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

The simple rate of return would be closest to:

White Company's required rate of return on capital budgeting projects is 12%.The company is considering an investment opportunity which would yield a cash flow of $10,000 in five years.What is the most that the company should be willing to invest in this project?

The following data pertain to an investment proposal: The working capital would be released for use elsewhere when the project is completed.What is the net present value of the project,using a discount rate of 8%?

Projects with shorter payback periods are always more profitable than projects with longer payback periods.

The cost of capital is the average rate of return a company must pay on its short-term bank borrowings.

If the incremental cost approach rather than the total cost approach is used to evaluate alternatives,which statement below is true?

In comparing two investment alternatives,the difference between the net present values of the two alternatives obtained using the total cost approach will be the same as the net present value obtained using the incremental cost approach.

What would the annual net cash inflows from this project have to be in order to justify investing in remodelling?

The net present value of the alternative of purchasing the new system is:

The payback method measures:

The discount rate used in net present value analysis should normally match or exceed the company's minimum required rate of return.

The payback period for the investment would be:

One of the strengths of the simple rate of return method is that it takes into account the time value of money in computing the return on an investment project.

The present value of a given sum to be received in five years will be exactly twice as great as the present value of an equal sum to be received in ten years.

One of the strengths of the simple rate of return method is that it uses data about cash flows rather than accounting net income.

In the simple rate of return method,depreciation expense is excluded from the calculation of incremental expenses.

Given the following data: Based on the data given,the annual cost savings would be:

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