Coffer Co.is analyzing two projects for the future.Assume that only one project can be selected. \[\begin{array} { c r r } & \frac { \text { Project X } } { } & \frac { \text { Project Y } } { } \\ \text { Cost of machine } & \$ 68,000 & \$ 60,000 \\ \text { Net cash flow: } & & \\ \text { Year 1 } & 24,000 & 4,000 \\ \text { Year 2 } & 24,000 & 26,000 \\ \text { Year 3 } & 24,000 & 26,000 \\ \text { Year 4 } & 0 & 20,000 \end{array}\] If the company is using the payback period method and it requires a payback of three years or less,which project should be selected?

A) Project Y. B) Project X. C) Both X and Y are acceptable projects. D) Neither X nor Y is an acceptable project. E) Project Y because it has a lower initial investment. A) Project Y. B) Project X. C) Both X and Y are acceptable projects. D) Neither X nor Y is an acceptable project. E) Project Y because it has a lower initial investment.

Exam 25: Capital Budgeting and Managerial Decisions

In this chapter,you examined several short-term managerial decision tasks.Identify (list)any three of these types of decision tasks: _____________; _; _____________

(Short Answer)

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Question 101

In business decision-making,managers typically examine the two fundamental factors of:

(Multiple Choice)

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Question 102

Edgar Company is considering the purchase of new equipment costing $80,000.The projected net cash flows are $35,000 for the first two years and $30,000 for years three and four.The revenue is to be received at the end of each year.The machine has a useful life of 4 years and no salvage value.Edgar requires a 10% return on its investments.The present value of an annuity of 1 and present value of an annuity for different periods is presented below.Compute the net present value of the machine. Present Value Present Value of ar Periods of 1 at 10\% Arruity of 1 at 10\% 1\ldots\ldots\ldots\ldots\ldots. 0.9091 0.9091 2\ldots\ldots\ldots\ldots\ldots. 0.8264 1.7355 3\ldots\ldots\ldots\ldots\ldots. 0.7513 2.4869 4\ldots\ldots\ldots\ldots\ldots 0.6830 3.1699

(Multiple Choice)

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Question 103

Coffer Co.is analyzing two projects for the future.Assume that only one project can be selected. Cost of machine \ 68,000 \ 60,000 Net cash flow: Year 1 24,000 4,000 Year 2 24,000 26,000 Year 3 24,000 26,000 Year 4 0 20,000 If the company is using the payback period method and it requires a payback of three years or less,which project should be selected?

(Multiple Choice)

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Question 104

The payback method,unlike the net present value method,does not ignore cash flows after the point of cost recovery.

(True/False)

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Question 105

Daniels Corporation is considering the purchase of new equipment costing $30,000.The projected annual after-tax net income from the equipment is $1,200,after deducting $10,000 for depreciation.The revenue is to be received at the end of each year.The machine has a useful life of 3 years and no salvage value.Daniels requires a 12% return on its investments.The present value of an annuity of 1 for different periods follows: Periods l2 Percent 1\ldots\ldots\ldots\ldots 0.8929 2\ldots\ldots\ldots 1.6901 3\ldots\ldots\ldots 2.4018 4\ldots\ldots\ldots 3.0373 What is the net present value of the machine?

(Multiple Choice)

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Question 106

What is capital budgeting? Why are capital budgeting decisions often difficult and risky?

(Essay)

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Question 107

The time expected to pass before the net cash flows from an investment would return its initial cost is called the:

(Multiple Choice)

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Question 108

An estimate of an asset's value to the company,calculated by discounting the future cash flows from the investment at an appropriate rate and then subtracting the initial cost of the investment,is known as:

(Multiple Choice)

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Question 109

Another name for relevant cost is unavoidable cost.

(True/False)

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Question 110

The calculation of annual net cash flow from a particular investment project should include all of the following except:

(Multiple Choice)

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Question 111

Edgar Company is considering the purchase of new equipment costing $80,000.The projected annual after-tax net income from the equipment is $10,200,after deducting $20,000 for depreciation.The revenue is to be received at the end of each year.The machine has a useful life of 4 years and no salvage value.Edgar requires a 10% return on its investments.The present value of an annuity of 1 and present value of an annuity for different periods is presented below.Compute the net present value of the machine. Present Value Present Value of ar Periods of 1 at 10\% Arruity of 1 at 10\% 1\ldots\ldots\ldots\ldots\ldots. 0.9091 0.9091 2\ldots\ldots\ldots\ldots\ldots. 0.8264 1.7355 3\ldots\ldots\ldots\ldots\ldots. 0.7513 2.4869 4\ldots\ldots\ldots\ldots\ldots 0.6830 3.1699

(Multiple Choice)

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Question 112

If the straight-line depreciation method is used,the annual average investment amount used in calculating rate of return is calculated as (beginning book value + ending book value)/2.

(True/False)

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Question 113

Relevant costs are also known as ___________________.

(Short Answer)

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Question 114

A new manufacturing machine is expected to cost $286,000,have an eight-year life,and a $30,000 salvage value.The machine will yield an annual incremental after-tax income of $35,000 after deducting the straight-line depreciation.Compute the payback period for the purchase.

(Multiple Choice)

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Question 115

A company is considering the purchase of new equipment for $45,000.The projected after-tax net income is $3,000 after deducting $15,000 of depreciation.The machine has a useful life of 3 years and no salvage value.Management of the company requires a 12% return on investment.The present value of an annuity of 1 for various periods follows: Period Present value of and annuity of 1 at 12\% 1\ldots\ldots 0.8929 2\ldots\ldots 1.6901 3\ldots\ldots 2.4018 What is the net present value of this machine assuming all cash flows occur at year-end?

(Essay)

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Question 116

A cost that requires a current and/or future outlay of cash,and is usually an incremental cost,is a(n):

(Multiple Choice)

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Question 117

_____________________ is the process of analyzing alternative long-term investments and deciding which assets to acquire or sell.

(Short Answer)

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Question 118

Identify at least three reasons for managers to favor the internal rate of return (IRR)over other capital budgeting approaches.

(Essay)

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Question 119

Capital budgeting decisions usually involve analysis of:

(Multiple Choice)

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Question 120

Showing 101 - 120 of 131

Exam 25: Capital Budgeting and Managerial Decisions

In this chapter,you examined several short-term managerial decision tasks.Identify (list)any three of these types of decision tasks: _________________________; _________________________; _________________________

In business decision-making,managers typically examine the two fundamental factors of:

The payback method,unlike the net present value method,does not ignore cash flows after the point of cost recovery.

What is capital budgeting? Why are capital budgeting decisions often difficult and risky?

The time expected to pass before the net cash flows from an investment would return its initial cost is called the:

An estimate of an asset's value to the company,calculated by discounting the future cash flows from the investment at an appropriate rate and then subtracting the initial cost of the investment,is known as:

Another name for relevant cost is unavoidable cost.

The calculation of annual net cash flow from a particular investment project should include all of the following except:

If the straight-line depreciation method is used,the annual average investment amount used in calculating rate of return is calculated as (beginning book value + ending book value)/2.

Relevant costs are also known as ___________________.

A new manufacturing machine is expected to cost $286,000,have an eight-year life,and a $30,000 salvage value.The machine will yield an annual incremental after-tax income of $35,000 after deducting the straight-line depreciation.Compute the payback period for the purchase.

A cost that requires a current and/or future outlay of cash,and is usually an incremental cost,is a(n):

_____________________ is the process of analyzing alternative long-term investments and deciding which assets to acquire or sell.

Identify at least three reasons for managers to favor the internal rate of return (IRR)over other capital budgeting approaches.

Capital budgeting decisions usually involve analysis of:

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets, natural Resources, and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments and International Operations

Reporting the Statement of Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets and Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Time Value of Money B

Activity-Based Costing C

Filters

In this chapter,you examined several short-term managerial decision tasks.Identify (list)any three of these types of decision tasks: _____________; _; _____________