Question 1

The simple rate of return for the new machine is closest to:

Accepted Answer

A)  20.0%. 
B)  27.5%. 
C)  37.5%. 
D)  80.0%. 
A)  20.0%. 
B)  27.5%. 
C)  37.5%. 
D)  80.0%.

Question 2

The simple rate of return on the investment would be:

Accepted Answer

A)  10%. 
B)  15%. 
C)  25%. 
D)  35%. 
A)  10%. 
B)  15%. 
C)  25%. 
D)  35%.

Question 3

Information on four investment proposals is given below:   In what order do the proposals in terms of preference according to the profitability index?

Accepted Answer

A)  3,4,1,2. 
B)  1,2,3,4. 
C)  1,3,2,4. 
D)  2,1,4,3. 
A)  3,4,1,2. 
B)  1,2,3,4. 
C)  1,3,2,4. 
D)  2,1,4,3.

Question 4

How can the internal rate of return of a project be determined?

Accepted Answer

A)  By finding the discount rate that yields a net present value of zero. 
B)  By determining that the project cash flows are equal each year. 
C)  By determining that the project profitability index is greater than one. 
D)  By some other method than listed above. 
A)  By finding the discount rate that yields a net present value of zero. 
B)  By determining that the project cash flows are equal each year. 
C)  By determining that the project profitability index is greater than one. 
D)  By some other method than listed above.

Question 5

Which statement below is true about the evaluation of an investment having uneven cash flows using the payback method?

Accepted Answer

A)  It cannot be done. 
B)  It can be done only by matching cash inflows and investment outflows on a year-by-year basis. 
C)  It will produce essentially the same results as those obtained through the use of discounted cash flow techniques. 
D)  It requires the use of a sophisticated calculator or computer software. 
A)  It cannot be done. 
B)  It can be done only by matching cash inflows and investment outflows on a year-by-year basis. 
C)  It will produce essentially the same results as those obtained through the use of discounted cash flow techniques. 
D)  It requires the use of a sophisticated calculator or computer software.

Question 6

The present value of the capital cost allowance tax shield is deducted from the total of the net present values of all other cash flows to determine the final projected net cash flows of a planned depreciable asset acquisition.

Accepted Answer

A) True 
 B)False

Question 7

The Whitton Company uses a discount rate of 16%.The company has an opportunity to buy a machine now for $18,000 that will yield cash inflows of $10,000 per year for each of the next three years.The machine would have no salvage value.The net present value of this machine to the nearest whole dollar is:

Accepted Answer

A)  ($9,980). 
B)  $4,460. 
C)  $12,000. 
D)  $22,460. 
A)  ($9,980). 
B)  $4,460. 
C)  $12,000. 
D)  $22,460.

Question 8

The capital budgeting method that divides a project's annual incremental net income by the initial investment is the:

Accepted Answer

A)  internal rate of return method. 
B)  the simple (or accounting)rate of return method. 
C)  the payback method. 
D)  the net present value method. 
A)  internal rate of return method. 
B)  the simple (or accounting)rate of return method. 
C)  the payback method. 
D)  the net present value method.

Question 9

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

Accepted Answer

A)  $8,381. 
B)  $9,619. 
C)  $12,381. 
D)  $19,567. 
A)  $8,381. 
B)  $9,619. 
C)  $12,381. 
D)  $19,567.

Question 10

A piece of equipment has a cost of $20,000.The equipment will provide cost savings of $3,500 each year for ten years,after which time it will have a salvage value of $2,500.If the company's discount rate is 12%,the equipment's net present value is?

Accepted Answer

A)  ($225). 
B)  $580. 
C)  $2,275. 
D)  $17,500. 
A)  ($225). 
B)  $580. 
C)  $2,275. 
D)  $17,500.

Question 11

In considering the impact of inflation in capital budgeting net present value calculations,which of the following should be adjusted for anticipated inflation?

Accepted Answer

A)  cash flows of future years. 
B)  cost of capital. 
C)  cash outflow at project start date. 
D)  A & B 
A)  cash flows of future years. 
B)  cost of capital. 
C)  cash outflow at project start date. 
D)  A & B

Question 12

The time value of money is ignored by which method?

Accepted Answer

A)  The internal rate of return method. 
B)  The simple rate of return method. 
C)  The net present value method. 
D)  Both the internal rate and simple rate of return methods. 
A)  The internal rate of return method. 
B)  The simple rate of return method. 
C)  The net present value method. 
D)  Both the internal rate and simple rate of return methods.

Question 13

The Higgins Company has just purchased a piece of equipment at a cost of $120,000.This equipment will reduce operating costs by $40,000 each year for the next eight years.This equipment replaces old equipment that was sold for $8,000 cash.The new equipment has a payback period of:

Accepted Answer

A)  2.8 years. 
B)  3.0 years. 
C)  8.0 years. 
D)  10.0 years. 
A)  2.8 years. 
B)  3.0 years. 
C)  8.0 years. 
D)  10.0 years.

Question 14

Assuming that a business has a project with anticipated positive net annual operating cash flows,assuming all other factors remain the same,the inclusion of income taxes in the capital budgeting analysis will:

Accepted Answer

A)  have no impact on the net present value. 
B)  decrease the net present value. 
C)  increase the net present value. 
D)  not be determinable. 
A)  have no impact on the net present value. 
B)  decrease the net present value. 
C)  increase the net present value. 
D)  not be determinable.

Question 15

The payback period is the length of time it takes for an investment to recoup its own initial cost out of the cash receipts it generates.

Accepted Answer

A) True 
 B)False

Question 16

When using internal rate of return to evaluate investment projects,if the internal rate of return is less than the required rate of return,the project should be accepted.

Accepted Answer

A) True 
 B)False

Question 17

The net present value of project Y is closest to:

Accepted Answer

A)  ($11,708). 
B)  $11,708. 
C)  $15,110. 
D)  $30,250. 
A)  ($11,708). 
B)  $11,708. 
C)  $15,110. 
D)  $30,250.

Question 18

When the net present value method is used,the internal rate of return is the discount rate used to compute the net present value of a project.

Accepted Answer

A) True 
 B)False

Question 19

The following data concern an investment project:

Accepted Answer

@#IMG-DLM& 
The working capital will be

Question 20

The payback period on the new machine is closest to:

Accepted Answer

A)  1.4 years. 
B)  2.7 years. 
C)  3.6 years. 
D)  5.0 years. 
A)  1.4 years. 
B)  2.7 years. 
C)  3.6 years. 
D)  5.0 years.

The simple rate of return for the new machine is closest to:

The simple rate of return on the investment would be:

Information on four investment proposals is given below: In what order do the proposals in terms of preference according to the profitability index?

How can the internal rate of return of a project be determined?

Which statement below is true about the evaluation of an investment having uneven cash flows using the payback method?

The present value of the capital cost allowance tax shield is deducted from the total of the net present values of all other cash flows to determine the final projected net cash flows of a planned depreciable asset acquisition.

The capital budgeting method that divides a project's annual incremental net income by the initial investment is the:

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

A piece of equipment has a cost of $20,000.The equipment will provide cost savings of $3,500 each year for ten years,after which time it will have a salvage value of $2,500.If the company's discount rate is 12%,the equipment's net present value is?

In considering the impact of inflation in capital budgeting net present value calculations,which of the following should be adjusted for anticipated inflation?

The time value of money is ignored by which method?

The Higgins Company has just purchased a piece of equipment at a cost of $120,000.This equipment will reduce operating costs by $40,000 each year for the next eight years.This equipment replaces old equipment that was sold for $8,000 cash.The new equipment has a payback period of:

Assuming that a business has a project with anticipated positive net annual operating cash flows,assuming all other factors remain the same,the inclusion of income taxes in the capital budgeting analysis will:

The payback period is the length of time it takes for an investment to recoup its own initial cost out of the cash receipts it generates.

When using internal rate of return to evaluate investment projects,if the internal rate of return is less than the required rate of return,the project should be accepted.

The net present value of project Y is closest to:

When the net present value method is used,the internal rate of return is the discount rate used to compute the net present value of a project.

The following data concern an investment project:

The payback period on the new machine is closest to:

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 for the new machine is closest to:

The simple rate of return on the investment would be:

Information on four investment proposals is given below: In what order do the proposals in terms of preference according to the profitability index?

How can the internal rate of return of a project be determined?

Which statement below is true about the evaluation of an investment having uneven cash flows using the payback method?

The present value of the capital cost allowance tax shield is deducted from the total of the net present values of all other cash flows to determine the final projected net cash flows of a planned depreciable asset acquisition.

The capital budgeting method that divides a project's annual incremental net income by the initial investment is the:

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

A piece of equipment has a cost of $20,000.The equipment will provide cost savings of $3,500 each year for ten years,after which time it will have a salvage value of $2,500.If the company's discount rate is 12%,the equipment's net present value is?

In considering the impact of inflation in capital budgeting net present value calculations,which of the following should be adjusted for anticipated inflation?

The time value of money is ignored by which method?

The Higgins Company has just purchased a piece of equipment at a cost of $120,000.This equipment will reduce operating costs by $40,000 each year for the next eight years.This equipment replaces old equipment that was sold for $8,000 cash.The new equipment has a payback period of:

Assuming that a business has a project with anticipated positive net annual operating cash flows,assuming all other factors remain the same,the inclusion of income taxes in the capital budgeting analysis will:

The payback period is the length of time it takes for an investment to recoup its own initial cost out of the cash receipts it generates.

When using internal rate of return to evaluate investment projects,if the internal rate of return is less than the required rate of return,the project should be accepted.

The net present value of project Y is closest to:

When the net present value method is used,the internal rate of return is the discount rate used to compute the net present value of a project.

The following data concern an investment project:

The payback period on the new machine is closest to:

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