Question 1

How is the AARR method different,compared to the payback method?

Accepted Answer

The AARR method considers income earned throughout a project's expected useful life.The payback method ignores cash flows after the payback period.

Question 2

The real rate of return for investments in Black Box,a multimedia dissemination company,is 18% per annum.At the current state of the economy,the manager expects a 12% per year inflation rate.
Required
Compute the nominal rate of return on the investment.

Accepted Answer

A) 32% 
B) 28% 
C) 12% 
D) 25% 
E) 33% 
A) 32% 
B) 28% 
C) 12% 
D) 25% 
E) 33% A

Question 3

Why is the finance theory important when managers use different methods that lead to different ranking of projects?

Accepted Answer

When different methods lead to different rankings of projects,finance theory suggests that managers give more weight to the NPV method because the assumptions made by the NPV method are most consistent with decisions that maximize the company value.

Question 4

Is the payback method affected by accrual accounting methods,for example,depreciation?

Accepted Answer

No,the payback metho

Question 5

The Hopewell Factory disposes a capital asset with an original cost of $195,000 and accumulated depreciation of $115,000 for $55,000.The managerial accountant has a tax rate of 40%.
Required
Compute the after-tax cash inflow from the disposal of the capital asset (include proceeds).

Accepted Answer

A) $45,000 
B) $55,000 
C) $60,000 
D) $65,000 
E) $67,200 
A) $45,000 
B) $55,000 
C) $60,000 
D) $65,000 
E) $67,200

Question 6

The manager at the Alexandria Environmental Services reported $14,250 as the current disposal value of an old machine.The loss on the disposal of the old machine is $50,000.The tax rate is 42%.The managerial accountant provided the following information:
Alexandria Environmental Service
   
Required
Compute the tax savings on the loss and the after tax inflow from current disposal of the old machine.Show all work.

Accepted Answer

The tax savings on the loss is $21,000.T

Question 7

Managers prefer projects with ________ payback periods.

Accepted Answer

A) equal 
B) shorter 
C) longer 
D) infinite 
E) solvent 
A) equal 
B) shorter 
C) longer 
D) infinite 
E) solvent

Question 8

Which of the following is not true about postinvestment audits?

Accepted Answer

A) Postinvestment audit provides managers with feedback about the performance of a project. 
B) Managers can compare actual results to the costs and benefits expected at the time of project selection. 
C) Optimistic estimates may cause managers to accept a project that they should reject. 
D) Optimistic estimates prevent managers from accepting a project that they should reject. 
E) Postinvestment audits prevent senior management from identifying problems that could be quickly corrected. 
A) Postinvestment audit provides managers with feedback about the performance of a project. 
B) Managers can compare actual results to the costs and benefits expected at the time of project selection. 
C) Optimistic estimates may cause managers to accept a project that they should reject. 
D) Optimistic estimates prevent managers from accepting a project that they should reject. 
E) Postinvestment audits prevent senior management from identifying problems that could be quickly corrected.

Question 9

The minimum acceptable annual rate of return on an investment is referred to as the _________.

Accepted Answer

A) income tax 
B) payback period 
C) required rate-of-return 
D) internal rate-of-return 
E) discounted cash flow methods 
A) income tax 
B) payback period 
C) required rate-of-return 
D) internal rate-of-return 
E) discounted cash flow methods

Question 10

The ________ calculates the discount rate at which an investment's present value of all expected cash inflows equals the present value of its expected cash outflows.

Accepted Answer

A) income tax 
B) payback period 
C) required rate-of-return 
D) internal rate-of-return 
E) discounted cash flow methods 
A) income tax 
B) payback period 
C) required rate-of-return 
D) internal rate-of-return 
E) discounted cash flow methods

Question 11

In what stage of the capital budgeting process do managers identify potential capital investments that agree with the organization's strategy?

Accepted Answer

A) Stage 1: Identify projects. 
B) Stage 2: Obtain information. 
C) Stage 3: Make predictions. 
D) Stage 4: Make decisions by choosing among alternatives. 
E) Stage 5: Implement the decision,evaluate performance,and learn. 
A) Stage 1: Identify projects. 
B) Stage 2: Obtain information. 
C) Stage 3: Make predictions. 
D) Stage 4: Make decisions by choosing among alternatives. 
E) Stage 5: Implement the decision,evaluate performance,and learn.

Question 12

The managerial accountant at Fort Story Manufacturing plant reported an annual cash inflow from its investment in a capital asset of $30,000 each year for five years.The corporation's income tax rate is 40%.
Required
Compute the five years total after-tax cash inflow from operations.

Accepted Answer

A) $70,000 
B) $80,000 
C) $90,000 
D) $100,000 
E) $110,000 
A) $70,000 
B) $80,000 
C) $90,000 
D) $100,000 
E) $110,000

Question 13

Managers use capital budgeting as a decision-making and a control tool.

Accepted Answer

A) True 
 B)False

Question 14

Making capital investments is often an arduous task,laden with the purchase of many different goods and services.

Accepted Answer

A) True 
 B)False

Question 15

________ is the rate of return demanded to cover investment risk and the decline in general purchasing power of the monetary unit as a result of expected inflation.

Accepted Answer

A) Inflated return 
B) Deflated return 
C) Real rate of return 
D) Nominal rate of return 
E) Forecasted rate of return 
A) Inflated return 
B) Deflated return 
C) Real rate of return 
D) Nominal rate of return 
E) Forecasted rate of return

Question 16

The AARR method considers income earned ________ a project's expected useful life.

Accepted Answer

A) before 
B) during 
C) throughout 
D) forecasted 
E) predicted 
A) before 
B) during 
C) throughout 
D) forecasted 
E) predicted

Question 17

Working capital refers to the difference between current assets and current liabilities.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is not an example of an asset related to initial working-capital investments?

Accepted Answer

A) Inventories. 
B) Current asset. 
C) Current liability. 
D) Accounts receivable. 
E) Minus current liability. 
A) Inventories. 
B) Current asset. 
C) Current liability. 
D) Accounts receivable. 
E) Minus current liability.

Question 19

What do postinvestment audits reveal to management about a project?

Accepted Answer

A postinvestment audit provides manageme

Question 20

The capital budgeting framework is useful to managers for evaluating the lifetime value of customers as well as the benefits from customer-focused strategies.

Accepted Answer

A) True 
 B)False

How is the AARR method different,compared to the payback method?

The real rate of return for investments in Black Box,a multimedia dissemination company,is 18% per annum.At the current state of the economy,the manager expects a 12% per year inflation rate. Required Compute the nominal rate of return on the investment.

Why is the finance theory important when managers use different methods that lead to different ranking of projects?

Is the payback method affected by accrual accounting methods,for example,depreciation?

The Hopewell Factory disposes a capital asset with an original cost of $195,000 and accumulated depreciation of $115,000 for $55,000.The managerial accountant has a tax rate of 40%. Required Compute the after-tax cash inflow from the disposal of the capital asset (include proceeds).

Managers prefer projects with ________ payback periods.

Which of the following is not true about postinvestment audits?

The minimum acceptable annual rate of return on an investment is referred to as the _________.

The ________ calculates the discount rate at which an investment's present value of all expected cash inflows equals the present value of its expected cash outflows.

In what stage of the capital budgeting process do managers identify potential capital investments that agree with the organization's strategy?

The managerial accountant at Fort Story Manufacturing plant reported an annual cash inflow from its investment in a capital asset of $30,000 each year for five years.The corporation's income tax rate is 40%. Required Compute the five years total after-tax cash inflow from operations.

Managers use capital budgeting as a decision-making and a control tool.

Making capital investments is often an arduous task,laden with the purchase of many different goods and services.

________ is the rate of return demanded to cover investment risk and the decline in general purchasing power of the monetary unit as a result of expected inflation.

The AARR method considers income earned ________ a project's expected useful life.

Working capital refers to the difference between current assets and current liabilities.

Which of the following is not an example of an asset related to initial working-capital investments?

What do postinvestment audits reveal to management about a project?

The capital budgeting framework is useful to managers for evaluating the lifetime value of customers as well as the benefits from customer-focused strategies.

The Manager and Management Accounting

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Process Costing and Cost Allocation

Activity-Based Costing and Activity-Based Management

Pricing Decisions, customer Profitability, and Cost Management

Determining How Costs Behave

Decision Making and Relevant Information

Quality, inventory Management, and Time

Master Budget and Responsibility Accounting

Flexible Budgets, cost Variances, and Management Control

Strategy, Balanced Scorecard, and Strategic Profitability Analysis

Transfer Pricing

Performance Measurement and Compensation

Filters

Exam 11: Capital Investments

How is the AARR method different,compared to the payback method?

The real rate of return for investments in Black Box,a multimedia dissemination company,is 18% per annum.At the current state of the economy,the manager expects a 12% per year inflation rate. Required Compute the nominal rate of return on the investment.

Why is the finance theory important when managers use different methods that lead to different ranking of projects?

Is the payback method affected by accrual accounting methods,for example,depreciation?

The Hopewell Factory disposes a capital asset with an original cost of $195,000 and accumulated depreciation of $115,000 for $55,000.The managerial accountant has a tax rate of 40%. Required Compute the after-tax cash inflow from the disposal of the capital asset (include proceeds).

Managers prefer projects with ________ payback periods.

Which of the following is not true about postinvestment audits?

The minimum acceptable annual rate of return on an investment is referred to as the _________.

The ________ calculates the discount rate at which an investment's present value of all expected cash inflows equals the present value of its expected cash outflows.

In what stage of the capital budgeting process do managers identify potential capital investments that agree with the organization's strategy?

The managerial accountant at Fort Story Manufacturing plant reported an annual cash inflow from its investment in a capital asset of $30,000 each year for five years.The corporation's income tax rate is 40%. Required Compute the five years total after-tax cash inflow from operations.

Managers use capital budgeting as a decision-making and a control tool.

Making capital investments is often an arduous task,laden with the purchase of many different goods and services.

________ is the rate of return demanded to cover investment risk and the decline in general purchasing power of the monetary unit as a result of expected inflation.

The AARR method considers income earned ________ a project's expected useful life.

Working capital refers to the difference between current assets and current liabilities.

Which of the following is not an example of an asset related to initial working-capital investments?

What do postinvestment audits reveal to management about a project?

The capital budgeting framework is useful to managers for evaluating the lifetime value of customers as well as the benefits from customer-focused strategies.

The Manager and Management Accounting

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Process Costing and Cost Allocation

Activity-Based Costing and Activity-Based Management

Pricing Decisions, customer Profitability, and Cost Management

Determining How Costs Behave

Decision Making and Relevant Information

Quality, inventory Management, and Time

Master Budget and Responsibility Accounting

Flexible Budgets, cost Variances, and Management Control

Strategy, Balanced Scorecard, and Strategic Profitability Analysis

Transfer Pricing

Performance Measurement and Compensation

Filters