Question 1

The interest rate used to find the present value of a future cash flow is the

Accepted Answer

A) prime rate. 
B) discount rate. 
C) cutoff rate. 
D) internal rate of return. 
A) prime rate. 
B) discount rate. 
C) cutoff rate. 
D) internal rate of return.

Question 2

The capital budgeting technique known as accounting rate of return uses
$\text {\underline{ salvage value
} }$       $\text {\underline{ time value of money} }$

Accepted Answer

A) no no 
B) no yes 
C) yes yes 
D) yes no 
A) no no 
B) no yes 
C) yes yes 
D) yes no

Question 3

The Logan Publishing Corporation is contemplating the acquisition of a state of the art printing press.The following information is relevant:
 The cost of the printing press is $ \$ 180,000 $
The anticipated revenue from the printing press is $ \$ 120,000 $ per year. The useful life of the car washis 12 years.
Anmul operating costs are expected to be:

$\begin{array}{ll}
\text { Salaries } &\$ 40,000  \
\text {Utilities } &  10,000 \
\text { Power usage } &4,600\
\text { Supplies } & 6,400\
\text { Repars/maintenance} &12,000\
\end{array}$

The firm uses straight-line depreciation
The salvage value for the car wash is zero. 
The company's cutdf points are as follows:
$\begin{array}{ll}
\text { Payback } &4years \
\text {Accounting rate of return } &  16 \% \\
\text { Internal rate of retune  } &16\%\\
\end{array}$
Ignore income taxes.
Required:
 a. $\text { Compute the annual cash inflow }$
 b. $\text { Compute the net present value }$
c. $\text { Compute internal rate of retun }$
d. $\text { Compute the payback period }$
e. $\text { Compute the profitability index }$
f. $\text { Should the printing press be purchased. }$

Accepted Answer

Ignore income taxes.
Required:
 a. @#LAT-DLM&
 
 b

Question 4

In a mutually inclusive project situation,if one project is chosen,all related projects are eliminated from further consideration.

Accepted Answer

A) True 
 B)False

Question 5

Smith Corporation
Smith Corporation is involved in the evaluation of a new computer-integrated manufacturing system.The system has a projected initial cost of $1,000,000.It has an expected life of six years,with no salvage value,and is expected to generate annual cost savings of $250,000.Based on Smith Corporation's analysis,the project has a net present value of $57,625.
Refer to Smith Corporation.What is the project's internal rate of return? Present value tables or a financial calculator are required.

Accepted Answer

A) between 12.5 and 13.0 percent 
B) between 11.0 and 11.5 percent 
C) between 11.5 and 12.0 percent 
D) between 13.0 and 13.5 percent 
A) between 12.5 and 13.0 percent 
B) between 11.0 and 11.5 percent 
C) between 11.5 and 12.0 percent 
D) between 13.0 and 13.5 percent

Question 6

When using one of the discounted cash flow methods to evaluate the desirability of a capital budgeting project,which of the following factors is generally not important?

Accepted Answer

A) method of financing the project under consideration 
B) timing of cash flows relating to the project 
C) impact of the project on income taxes to be paid 
D) amounts of cash flows relating to the project 
A) method of financing the project under consideration 
B) timing of cash flows relating to the project 
C) impact of the project on income taxes to be paid 
D) amounts of cash flows relating to the project

Question 7

A change in the discount rate used to evaluate a specific project will affect the project's

Accepted Answer

A) life. 
B) payback period. 
C) net present value. 
D) total cash flows. 
A) life. 
B) payback period. 
C) net present value. 
D) total cash flows.

Question 8

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 9

Which of the following capital budgeting techniques has been criticized because it fails to consider investment profitability?

Accepted Answer

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

Question 10

The tax benefit from depreciation expense is the depreciation amount divided by the tax rate.

Accepted Answer

A) True 
 B)False

Question 11

A capital budget is used by management to determine
$\text {\underline{in what to invest } }$                  $\text {\underline{how much to invest } }$

Accepted Answer

A) no no 
B) no yes 
C) yes no 
D) yes yes 
A) no no 
B) no yes 
C) yes no 
D) yes yes

Question 12

The rate of interest that produces a zero net present value when a project's discounted cash operating advantage is netted against its discounted net investment is the

Accepted Answer

A) cost of capital. 
B) discount rate. 
C) cutoff rate. 
D) internal rate of return. 
A) cost of capital. 
B) discount rate. 
C) cutoff rate. 
D) internal rate of return.

Question 13

When a project is chosen from a group and all other projects are excluded from further consideration,the project is referred to as _________________________________.

Accepted Answer

The answer of When a project is chosen from a...

Question 14

As the marginal tax rate goes up,the benefit from the depreciation tax shield

Accepted Answer

A) decreases. 
B) increases. 
C) stays the same. 
D) can move up or down depending on whether the firm's cost of capital is high or low. 
A) decreases. 
B) increases. 
C) stays the same. 
D) can move up or down depending on whether the firm's cost of capital is high or low.

Question 15

When using the risk-adjusted discount rate method,a manager increases the rate used for discounting future cash outflows.

Accepted Answer

A) True 
 B)False

Question 16

Why is the profitability index a better basis than net present value to compare projects that require different levels of investment?

Accepted Answer

The profitability index relates the magn

Question 17

The ____ is the highest rate of return that can be earned from the most attractive,alternative capital project available to the firm.

Accepted Answer

A) accounting rate of return 
B) internal rate of return 
C) hurdle rate 
D) opportunity cost of capital 
A) accounting rate of return 
B) internal rate of return 
C) hurdle rate 
D) opportunity cost of capital

Question 18

The rate of return required by a company that is used to determine the imputed interest portion of future cash receipts and disbursements is referred to as the _______________________.

Accepted Answer

The answer of The rate of return required by a...

Question 19

Sensitivity analysis is

Accepted Answer

A) an appropriate response to uncertainty in cash flow projections. 
B) useful in measuring the variance of the Fisher rate. 
C) typically conducted in the post investment audit. 
D) useful to compare projects requiring vastly different levels of initial investment. 
A) an appropriate response to uncertainty in cash flow projections. 
B) useful in measuring the variance of the Fisher rate. 
C) typically conducted in the post investment audit. 
D) useful to compare projects requiring vastly different levels of initial investment.

Question 20

Debt in the capital structure could be treated as if it were common equity in computing the weighted average cost of capital if the debt were

Accepted Answer

A) callable. 
B) participating. 
C) cumulative. 
D) convertible. 
A) callable. 
B) participating. 
C) cumulative. 
D) convertible.

The interest rate used to find the present value of a future cash flow is the

The capital budgeting technique known as accounting rate of return uses $\text {\underline{ salvage value} }$ $\text {\underline{ time value of money} }$

In a mutually inclusive project situation,if one project is chosen,all related projects are eliminated from further consideration.

When using one of the discounted cash flow methods to evaluate the desirability of a capital budgeting project,which of the following factors is generally not important?

A change in the discount rate used to evaluate a specific project will affect the project's

The payback method measures

Which of the following capital budgeting techniques has been criticized because it fails to consider investment profitability?

The tax benefit from depreciation expense is the depreciation amount divided by the tax rate.

A capital budget is used by management to determine $\text {\underline{in what to invest } }$ $\text {\underline{how much to invest } }$

The rate of interest that produces a zero net present value when a project's discounted cash operating advantage is netted against its discounted net investment is the

When a project is chosen from a group and all other projects are excluded from further consideration,the project is referred to as _________________________________.

As the marginal tax rate goes up,the benefit from the depreciation tax shield

When using the risk-adjusted discount rate method,a manager increases the rate used for discounting future cash outflows.

Why is the profitability index a better basis than net present value to compare projects that require different levels of investment?

The ____ is the highest rate of return that can be earned from the most attractive,alternative capital project available to the firm.

The rate of return required by a company that is used to determine the imputed interest portion of future cash receipts and disbursements is referred to as the _______________________.

Sensitivity analysis is

Debt in the capital structure could be treated as if it were common equity in computing the weighted average cost of capital if the debt were

Introduction to Cost Accounting

Cost Terminology and Cost Behaviors

Predetermined Overhead Rates, Flexible Budgets, and Absorptionvariable Costing

Activity-Based Management and Activity-Based Costing

Job Order Costing

Process Costing

Standard Costing and Variance Analysis

The Master Budget

Break-Even Point and Cost-Volume-Profit Analysis

Relevant Information for Decision Making

Allocation of Joint Costs and Accounting for By-Products

Introduction to Cost Management Systems

Responsibility Accounting,support Department Allocations,and Transfer Pricing

Performance Measurement, balanced Scorecards, and Performance Rewards

Managing Costs and Uncertainty

Implementing Quality Concepts

Inventory and Production Management

Emerging Management Practices

Filters

Exam 15: Capital Budgeting

The interest rate used to find the present value of a future cash flow is the

The capital budgeting technique known as accounting rate of return uses salvage value‾ \text {\underline{ salvage value} } salvage value​ time value of money‾ \text {\underline{ time value of money} } time value of money​

In a mutually inclusive project situation,if one project is chosen,all related projects are eliminated from further consideration.

When using one of the discounted cash flow methods to evaluate the desirability of a capital budgeting project,which of the following factors is generally not important?

A change in the discount rate used to evaluate a specific project will affect the project's

The payback method measures

Which of the following capital budgeting techniques has been criticized because it fails to consider investment profitability?

The tax benefit from depreciation expense is the depreciation amount divided by the tax rate.

A capital budget is used by management to determine in what to invest ‾ \text {\underline{in what to invest } }in what to invest ​ how much to invest ‾ \text {\underline{how much to invest } }how much to invest ​

The rate of interest that produces a zero net present value when a project's discounted cash operating advantage is netted against its discounted net investment is the

When a project is chosen from a group and all other projects are excluded from further consideration,the project is referred to as _________________________________.

As the marginal tax rate goes up,the benefit from the depreciation tax shield

When using the risk-adjusted discount rate method,a manager increases the rate used for discounting future cash outflows.

Why is the profitability index a better basis than net present value to compare projects that require different levels of investment?

The ____ is the highest rate of return that can be earned from the most attractive,alternative capital project available to the firm.

The rate of return required by a company that is used to determine the imputed interest portion of future cash receipts and disbursements is referred to as the _______________________.

Sensitivity analysis is

Debt in the capital structure could be treated as if it were common equity in computing the weighted average cost of capital if the debt were

Introduction to Cost Accounting

Cost Terminology and Cost Behaviors

Predetermined Overhead Rates, Flexible Budgets, and Absorptionvariable Costing

Activity-Based Management and Activity-Based Costing

Job Order Costing

Process Costing

Standard Costing and Variance Analysis

The Master Budget

Break-Even Point and Cost-Volume-Profit Analysis

Relevant Information for Decision Making

Allocation of Joint Costs and Accounting for By-Products

Introduction to Cost Management Systems

Responsibility Accounting,support Department Allocations,and Transfer Pricing

Performance Measurement, balanced Scorecards, and Performance Rewards

Managing Costs and Uncertainty

Implementing Quality Concepts

Inventory and Production Management

Emerging Management Practices

Filters

The capital budgeting technique known as accounting rate of return uses $\text {\underline{ salvage value} }$ $\text {\underline{ time value of money} }$

A capital budget is used by management to determine $\text {\underline{in what to invest } }$ $\text {\underline{how much to invest } }$