Question 1

The present value of the annual cost savings of $72,000 is closest to:

Accepted Answer

A) $22,608 
B) $874,298 
C) $504,000 
D) $274,464 
A) $22,608 
B) $874,298 
C) $504,000 
D) $274,464

Question 2

Neither the net present value method nor the internal rate of return method can be used as a screening tool in capital budgeting decisions.

Accepted Answer

A) True 
 B)False

Question 3

Penniston Corporation is considering a capital budgeting project that would require an initial investment of $630,000 and working capital of $73,000.The working capital would be released for use elsewhere at the end of the project in 3 years.The investment would generate annual cash inflows of $228,000 for the life of the project.At the end of the project, equipment that had been used in the project could be sold for $29,000.The company's discount rate is 12%.The net present value of the project is closest to:

Accepted Answer

A) $(134,696) 
B) $(82,720) 
C) $(9,720) 
D) $54,000 
A) $(134,696) 
B) $(82,720) 
C) $(9,720) 
D) $54,000

Question 4

(Ignore income taxes in this problem.)An expansion at Fey, Inc., would increase sales revenues by $150,000 per year and cash operating expenses by $47,000 per year.The initial investment would be for equipment that would cost $328,000 and have a 8 year life with no salvage value.The annual depreciation on the equipment would be $41,000.The simple rate of return on the investment is closest to:

Accepted Answer

A) 41.3% 
B) 18.9% 
C) 12.5% 
D) 31.4% 
A) 41.3% 
B) 18.9% 
C) 12.5% 
D) 31.4%

Question 5

(Ignore income taxes in this problem.)Given the following data:   The life of the equipment must be:

Accepted Answer

A) it is impossible to determine from the data given 
B) 5 years 
C) 6 years 
D) 7 years 
A) it is impossible to determine from the data given 
B) 5 years 
C) 6 years 
D) 7 years

Question 6

When computing the project profitability index of an investment project, the investment required should exclude any investment made in working capital at the beginning of the project.

Accepted Answer

A) True 
 B)False

Question 7

Rank the projects according to the profitability index, from most profitable to least profitable.

Accepted Answer

A) E, C, D 
B) E, D, C 
C) D, C, E 
D) C, E, D 
A) E, C, D 
B) E, D, C 
C) D, C, E 
D) C, E, D

Question 8

Puello Corporation has provided the following data concerning an investment project that it is considering:   The life of the project is 4 years.The company's discount rate is 8%.The net present value of the project is closest to:

Accepted Answer

A) $480,000 
B) $480,240 
C) $100,000 
D) $240 
A) $480,000 
B) $480,240 
C) $100,000 
D) $240

Question 9

(Ignore income taxes in this problem.)The following data pertain to an investment proposal:   The net present value of the proposed investment is closest to:

Accepted Answer

A) $2,622 
B) $5,146 
C) $2,524 
D) $31,000 
A) $2,622 
B) $5,146 
C) $2,524 
D) $31,000

Question 10

The net present value of Project B is:

Accepted Answer

A) $90,355 
B) $76,115 
C) $36,115 
D) $54,355 
A) $90,355 
B) $76,115 
C) $36,115 
D) $54,355

Question 11

(Ignore income taxes in this problem.)Ataxia Fitness Center is considering an investment in some additional weight training equipment.The equipment has an estimated useful life of 10 years with no salvage value at the end of the 10 years.Ataxia's internal rate of return on this equipment is 8%.Ataxia's discount rate is also 8%.The payback period on this equipment is closest to:

Accepted Answer

A) 10 years 
B) 6.71 years 
C) 5 years 
D) 7.81 years 
A) 10 years 
B) 6.71 years 
C) 5 years 
D) 7.81 years

Question 12

(Ignore income taxes in this problem.)The following data pertain to an investment project:   The internal rate of return is closest to:

Accepted Answer

A) 12% 
B) 14% 
C) 10% 
D) 8% 
A) 12% 
B) 14% 
C) 10% 
D) 8%

Question 13

(Ignore income taxes in this problem.)Russnak Corporation is investigating automating a process by purchasing a new machine for $198,000 that would have a 9 year useful life and no salvage value.By automating the process, the company would save $68,000 per year in cash operating costs.The company's current equipment would be sold for scrap now, yielding $18,000.The annual depreciation on the new machine would be $22,000.
Required:
Determine the simple rate of return on the investment to the nearest tenth of a percent.Show your work!

Accepted Answer

@#IMG-DLM&_TB2627_00 Simple rate of retu

Question 14

Ignoring any salvage value, to the nearest whole dollar how large would the annual cash inflow have to be to make the investment in the equipment financially attractive?

Accepted Answer

A) $54,660 
B) $49,194 
C) $87,400 
D) $273,300 
A) $54,660 
B) $49,194 
C) $87,400 
D) $273,300

Question 15

The project profitability index and the internal rate of return:

Accepted Answer

A) will always result in the same preference ranking for investment projects. 
B) will sometimes result in different preference rankings for investment projects. 
C) are less dependable than the payback method in ranking investment projects. 
D) are less dependable than net present value in ranking investment projects. 
A) will always result in the same preference ranking for investment projects. 
B) will sometimes result in different preference rankings for investment projects. 
C) are less dependable than the payback method in ranking investment projects. 
D) are less dependable than net present value in ranking investment projects.

Question 16

(Ignore income taxes in this problem.)HI Corporation is considering the purchase of a machine that promises to reduce operating costs by the same amount for every year of its 5-year useful life.The machine will cost $205,980 and has no salvage value.The machine has a 14% internal rate of return.
Required:
What are the annual cost savings promised by the machine?

Accepted Answer

Factor of the internal rate of

Question 17

A preference decision in capital budgeting:

Accepted Answer

A) is concerned with whether a project clears the minimum required rate of return hurdle. 
B) comes before the screening decision. 
C) is concerned with determining which of several acceptable alternatives is best. 
D) involves using market research to determine customers' preferences. 
A) is concerned with whether a project clears the minimum required rate of return hurdle. 
B) comes before the screening decision. 
C) is concerned with determining which of several acceptable alternatives is best. 
D) involves using market research to determine customers' preferences.

Question 18

(Ignore income taxes in this problem.)A company has provided the following data concerning a proposed project:   The annual cost savings must be closest to:

Accepted Answer

A) $4,024 
B) $2,436 
C) $1,875 
D) $3,704 
A) $4,024 
B) $2,436 
C) $1,875 
D) $3,704

Question 19

The salvage value of new equipment should not be considered when using the internal rate of return method to evaluate a project.

Accepted Answer

A) True 
 B)False

Question 20

(Ignore income taxes in this problem.)Slomkowski Corporation is contemplating purchasing equipment that would increase sales revenues by $298,000 per year and cash operating expenses by $143,000 per year.The equipment would cost $712,000 and have a 8 year life with no salvage value.The annual depreciation would be $89,000.The simple rate of return on the investment is closest to:

Accepted Answer

A) 9.3% 
B) 21.8% 
C) 22.1% 
D) 12.5% 
A) 9.3% 
B) 21.8% 
C) 22.1% 
D) 12.5%

The present value of the annual cost savings of $72,000 is closest to:

Neither the net present value method nor the internal rate of return method can be used as a screening tool in capital budgeting decisions.

(Ignore income taxes in this problem.)Given the following data: The life of the equipment must be:

When computing the project profitability index of an investment project, the investment required should exclude any investment made in working capital at the beginning of the project.

Rank the projects according to the profitability index, from most profitable to least profitable.

Puello Corporation has provided the following data concerning an investment project that it is considering: The life of the project is 4 years.The company's discount rate is 8%.The net present value of the project is closest to:

(Ignore income taxes in this problem.)The following data pertain to an investment proposal: The net present value of the proposed investment is closest to:

The net present value of Project B is:

(Ignore income taxes in this problem.)The following data pertain to an investment project: The internal rate of return is closest to:

Ignoring any salvage value, to the nearest whole dollar how large would the annual cash inflow have to be to make the investment in the equipment financially attractive?

The project profitability index and the internal rate of return:

A preference decision in capital budgeting:

(Ignore income taxes in this problem.)A company has provided the following data concerning a proposed project: The annual cost savings must be closest to:

The salvage value of new equipment should not be considered when using the internal rate of return method to evaluate a project.

Managerial Accounting and Cost Concepts

Job-Order Costing: Calculating Unit Product Costs

Job-Order Costing: Cost Flows and External Reporting

Activity-Based Costing

Process Costing6 Cost-Volume-Profit Relationships

Cost-Volume-Profit Relationships

Variable Costing and Segment Reporting: Tools for Management

Master Budgeting

Performance Measurement in Decentralized Organizations

Differential Analysis: The Key to Decision Making

Flexible Budgets Standard Costs and Variance Analysis

Statement of Cash Flows

Financial Statement Analysis

Job-Order Costing: Cost Flows and External Reporting

Process Costing6 Cost-Volume-Profit Relationships

Cost-Volume-Profit Relationships

Flexible Budgets, Standard Costs, and Variance Analysis

Flexible Budgets, Standard Costs, and Variance Analysis

A Capital Budgeting Decisions

A Statement of Cash Flows

Filters

Exam 12: Capital Budgeting Decisions

The present value of the annual cost savings of $72,000 is closest to:

Neither the net present value method nor the internal rate of return method can be used as a screening tool in capital budgeting decisions.

(Ignore income taxes in this problem.)Given the following data: The life of the equipment must be:

When computing the project profitability index of an investment project, the investment required should exclude any investment made in working capital at the beginning of the project.

Rank the projects according to the profitability index, from most profitable to least profitable.

Puello Corporation has provided the following data concerning an investment project that it is considering: The life of the project is 4 years.The company's discount rate is 8%.The net present value of the project is closest to:

(Ignore income taxes in this problem.)The following data pertain to an investment proposal: The net present value of the proposed investment is closest to:

The net present value of Project B is:

(Ignore income taxes in this problem.)The following data pertain to an investment project: The internal rate of return is closest to:

Ignoring any salvage value, to the nearest whole dollar how large would the annual cash inflow have to be to make the investment in the equipment financially attractive?

The project profitability index and the internal rate of return:

A preference decision in capital budgeting:

(Ignore income taxes in this problem.)A company has provided the following data concerning a proposed project: The annual cost savings must be closest to:

The salvage value of new equipment should not be considered when using the internal rate of return method to evaluate a project.

Managerial Accounting and Cost Concepts

Job-Order Costing: Calculating Unit Product Costs

Job-Order Costing: Cost Flows and External Reporting

Activity-Based Costing

Process Costing6 Cost-Volume-Profit Relationships

Cost-Volume-Profit Relationships

Variable Costing and Segment Reporting: Tools for Management

Master Budgeting

Performance Measurement in Decentralized Organizations

Differential Analysis: The Key to Decision Making

Flexible Budgets Standard Costs and Variance Analysis

Statement of Cash Flows

Financial Statement Analysis

Job-Order Costing: Cost Flows and External Reporting

Process Costing6 Cost-Volume-Profit Relationships

Cost-Volume-Profit Relationships

Flexible Budgets, Standard Costs, and Variance Analysis

Flexible Budgets, Standard Costs, and Variance Analysis

A Capital Budgeting Decisions

A Statement of Cash Flows

Filters