Question 1

The combined weighted average interest rate that a firm incurs on its long-term debt,preferred stock,and common stock 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 2

The weighted average cost of capital that is used to evaluate a specific project should be based on the

Accepted Answer

A) mix of capital components that was used to finance a project from last year. 
B) overall capital structure of the corporation. 
C) cost of capital for other corporations with similar investments. 
D) mix of capital components for all capital acquired in the most recent fiscal year. 
A) mix of capital components that was used to finance a project from last year. 
B) overall capital structure of the corporation. 
C) cost of capital for other corporations with similar investments. 
D) mix of capital components for all capital acquired in the most recent fiscal year.

Question 3

Managers must often use multiple measures to effectively rank capital projects.

Accepted Answer

A) True 
 B)False

Question 4

Discounting net cash inflows by using an organization's desired rate of return and comparing the result with the net cash outflows for a project yields __________________________.

Accepted Answer

The answer of Discounting net cash inflows by using an...

Question 5

The profitability index gauges the efficiency of a firm's use of capital.

Accepted Answer

A) True 
 B)False

Question 6

When a profitable corporation sells an asset at a loss,the after-tax cash flow on the sale will

Accepted Answer

A) exceed the pre-tax cash flow on the sale. 
B) be less than the pre-tax cash flow on the sale. 
C) be the same as the pre-tax cash flow on the sale. 
D) increase the corporation's overall tax liability. 
A) exceed the pre-tax cash flow on the sale. 
B) be less than the pre-tax cash flow on the sale. 
C) be the same as the pre-tax cash flow on the sale. 
D) increase the corporation's overall tax liability.

Question 7

Alan Arnold has just turned 65.He has $100,000 to invest in a retirement annuity.One investment company has offered to pay Alan $10,000 per year for 15 years (payments to begin in one year)in exchange for an immediate $100,000 payment.If Alan accepts the offer from the investment company,what is his expected return on the $100,000 investment (assume a return that is compounded annually)? Present value tables or a financial calculator are required.

Accepted Answer

A) between 5 and 6 percent 
B) between 6 and 7 percent 
C) between 7 and 8 percent 
D) between 8 and 9 percent 
A) between 5 and 6 percent 
B) between 6 and 7 percent 
C) between 7 and 8 percent 
D) between 8 and 9 percent

Question 8

Which of the following changes would not decrease the present value of the future depreciation deductions on a specific depreciable asset?

Accepted Answer

A) a decrease in the marginal tax rate 
B) a decrease in the discount rate 
C) a decrease in the rate of depreciation 
D) an increase in the life expectancy of the depreciable asset 
A) a decrease in the marginal tax rate 
B) a decrease in the discount rate 
C) a decrease in the rate of depreciation 
D) an increase in the life expectancy of the depreciable asset

Question 9

The accounting rate of return considers the salvage value of an asset.

Accepted Answer

A) True 
 B)False

Question 10

Assume that X represents a sum of money that Bill has available to invest in a project that will yield a return of r.In the formula Y = X(1 + r),Y represents the

Accepted Answer

A) future value of X in one period. 
B) future value interest factor associated with r. 
C) present value of X. 
D) present value interest factor associated with r. 
A) future value of X in one period. 
B) future value interest factor associated with r. 
C) present value of X. 
D) present value interest factor associated with r.

Question 11

The capital budgeting technique that divides average annual profits from an investment by the average investment in a project is referred to as the _____________________________________.

Accepted Answer

accounting

Question 12

The discount rate that causes the present value of a project's net cash inflows to equal the present value of the cash outflows is referred to as the ________________________________________.

Accepted Answer

internal r

Question 13

In comparing two projects,the ____ is often used to evaluate the relative riskiness of the projects.

Accepted Answer

A) payback period 
B) net present value 
C) internal rate of return 
D) discount rate 
A) payback period 
B) net present value 
C) internal rate of return 
D) discount rate

Question 14

Duval Corporation
The Duval Corporation has recently evaluated a proposal to invest in cost-reducing production technology.According to the evaluation,the project would require an initial investment of $17,166 and would provide equal annual cost savings for five years.Based on a 10 percent discount rate,the project generates a net present value of $1,788.The project is not expected to have any salvage value at the end of its five-year life.
Refer to Duval Corporation.What are the expected annual cost savings of the project? Present value tables or a financial calculator are required.

Accepted Answer

A) $3,500 
B) $4,000 
C) $4,500 
D) $5,000 
A) $3,500 
B) $4,000 
C) $4,500 
D) $5,000

Question 15

If a project's internal rate of return is greater than or equal to an organization's hurdle rate,the project is considered to be an acceptable investment.

Accepted Answer

A) True 
 B)False

Question 16

Fred Hammond recently invested in a project that has an expected annual cash inflow of $7,000 for 10 years,and an expected payback period of 3.6 years.How much did Fred invest in the project?

Accepted Answer

A) $19,444 
B) $36,000 
C) $25,200 
D) $40,000 
A) $19,444 
B) $36,000 
C) $25,200 
D) $40,000

Question 17

The after-tax net present value of a project is affected by

Accepted Answer

A) tax-deductible cash flows. 
B) non-tax-deductible cash flows. 
C) accounting accruals. 
D) all of the above. 
A) tax-deductible cash flows. 
B) non-tax-deductible cash flows. 
C) accounting accruals. 
D) all of the above.

Question 18

In a mutually inclusive project situation,if one project is chosen,all related projects are also chosen.

Accepted Answer

A) True 
 B)False

Question 19

The payback period typically ignores the time value of money.

Accepted Answer

A) True 
 B)False

Question 20

Mapleton Company
Mapleton Company is considering an investment in a machine that would reduce annual labor costs by $30,000.The machine has an expected life of 10 years with no salvage value.The machine would be depreciated according to the straight-line method over its useful life.The company's marginal tax rate is 30 percent.
Refer to Mapleton Company.Assume the company pays $250,000 for the machine.What is the expected internal rate of return on the machine? Present value tables or a financial calculator are required.

Accepted Answer

A) between 8 and 9 percent 
B) between 3 and 4 percent 
C) between 17 and 18 percent 
D) less than 1 percent 
A) between 8 and 9 percent 
B) between 3 and 4 percent 
C) between 17 and 18 percent 
D) less than 1 percent

The combined weighted average interest rate that a firm incurs on its long-term debt,preferred stock,and common stock is the

The weighted average cost of capital that is used to evaluate a specific project should be based on the

Managers must often use multiple measures to effectively rank capital projects.

Discounting net cash inflows by using an organization's desired rate of return and comparing the result with the net cash outflows for a project yields __________________________.

The profitability index gauges the efficiency of a firm's use of capital.

When a profitable corporation sells an asset at a loss,the after-tax cash flow on the sale will

Which of the following changes would not decrease the present value of the future depreciation deductions on a specific depreciable asset?

The accounting rate of return considers the salvage value of an asset.

Assume that X represents a sum of money that Bill has available to invest in a project that will yield a return of r.In the formula Y = X(1 + r),Y represents the

The capital budgeting technique that divides average annual profits from an investment by the average investment in a project is referred to as the _____________________________________.

The discount rate that causes the present value of a project's net cash inflows to equal the present value of the cash outflows is referred to as the ________________________________________.

In comparing two projects,the ____ is often used to evaluate the relative riskiness of the projects.

If a project's internal rate of return is greater than or equal to an organization's hurdle rate,the project is considered to be an acceptable investment.

Fred Hammond recently invested in a project that has an expected annual cash inflow of $7,000 for 10 years,and an expected payback period of 3.6 years.How much did Fred invest in the project?

The after-tax net present value of a project is affected by

In a mutually inclusive project situation,if one project is chosen,all related projects are also chosen.

The payback period typically ignores the time value of money.

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 combined weighted average interest rate that a firm incurs on its long-term debt,preferred stock,and common stock is the

The weighted average cost of capital that is used to evaluate a specific project should be based on the

Managers must often use multiple measures to effectively rank capital projects.

Discounting net cash inflows by using an organization's desired rate of return and comparing the result with the net cash outflows for a project yields __________________________.

The profitability index gauges the efficiency of a firm's use of capital.

When a profitable corporation sells an asset at a loss,the after-tax cash flow on the sale will

Which of the following changes would not decrease the present value of the future depreciation deductions on a specific depreciable asset?

The accounting rate of return considers the salvage value of an asset.

Assume that X represents a sum of money that Bill has available to invest in a project that will yield a return of r.In the formula Y = X(1 + r),Y represents the

The capital budgeting technique that divides average annual profits from an investment by the average investment in a project is referred to as the _____________________________________.

The discount rate that causes the present value of a project's net cash inflows to equal the present value of the cash outflows is referred to as the ________________________________________.

In comparing two projects,the ____ is often used to evaluate the relative riskiness of the projects.

If a project's internal rate of return is greater than or equal to an organization's hurdle rate,the project is considered to be an acceptable investment.

Fred Hammond recently invested in a project that has an expected annual cash inflow of $7,000 for 10 years,and an expected payback period of 3.6 years.How much did Fred invest in the project?

The after-tax net present value of a project is affected by

In a mutually inclusive project situation,if one project is chosen,all related projects are also chosen.

The payback period typically ignores the time value of money.

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