Question 1

In computer-integrated manufacturing technology (CIM):

Accepted Answer

A) computers give instructions that quickly and automatically set up and run equipment to manufacture many different products. 
B) managers do not need to track the rapid changes of consumer demand in the future. 
C) promotes a reduction in worker knowledge of,and experience with,automation. 
D) the benefits of automation are very easy to trace. 
E) managers do not need to develop any judgment and intuition to make decisions. 
A) computers give instructions that quickly and automatically set up and run equipment to manufacture many different products. 
B) managers do not need to track the rapid changes of consumer demand in the future. 
C) promotes a reduction in worker knowledge of,and experience with,automation. 
D) the benefits of automation are very easy to trace. 
E) managers do not need to develop any judgment and intuition to make decisions.

Question 2

A key feature of the discounted cash flow (DCF)method is ________.

Accepted Answer

A) operating income as determined by accrual accounting 
B) investment in working capital 
C) the time value of money 
D) net after-tax initial investments 
E) equity and debt securities 
A) operating income as determined by accrual accounting 
B) investment in working capital 
C) the time value of money 
D) net after-tax initial investments 
E) equity and debt securities

Question 3

The manager at Starfish Manufacturing purchased a new machine with an upgraded feature with an investment of $285,000.The manager forecasted an increase in expected average annual after-tax operating income of $46,000.
Required
Compute the accrual accounting rate of return (AARR).

Accepted Answer

A) 15.14% 
B) 16.14% 
C) 17.14% 
D) 18.14% 
E) 19.14% 
A) 15.14% 
B) 16.14% 
C) 17.14% 
D) 18.14% 
E) 19.14%

Question 4

The Meredith Organization has an annual cash inflow from operations from its investment in a capital asset of $25,000 each for five years.The corporation's income tax rate is 25%.
Required
Compute the five years total after-tax cash inflow from operations.

Accepted Answer

A) $90,000 
B) $91,450 
C) $92,250 
D) $93,750 
E) $94,250 
A) $90,000 
B) $91,450 
C) $92,250 
D) $93,750 
E) $94,250

Question 5

Why do managers use the net present value (NPV)method?

Accepted Answer

Managers use the net present value metho

Question 6

What do managers need to consider about the after-tax cash flow from the current disposal of an old machine?

Accepted Answer

Managers understand that cash received f

Question 7

Projects with longer payback periods provide managers more flexibility because funds for other projects become available later.

Accepted Answer

A) True 
 B)False

Question 8

There is an inconsistency between using the NPV method as best for capital budgeting decisions and then using a different method to evaluate performance.

Accepted Answer

A) True 
 B)False

Question 9

Gains or losses on the sale of depreciable assets can be taxed at the same rate as ordinary income.

Accepted Answer

A) True 
 B)False

Question 10

The ________ calculates the amount of time required for the discounted expected future cash flows to recoup the net initial investment in a project.

Accepted Answer

A) internal rate of return 
B) discounted payback method 
C) opportunity cost of capital 
D) net present value method 
E) accrual accounting rate-or-return 
A) internal rate of return 
B) discounted payback method 
C) opportunity cost of capital 
D) net present value method 
E) accrual accounting rate-or-return

Question 11

When managers calculate the accrual accounting rate of return (AARR),what values should be used?

Accepted Answer

A) The initial investment and the project's expected useful life. 
B) The discount rate and the net initial investment. 
C) The NPV and the IRR. 
D) The non-uniform cash flows and the net initial investment. 
E) The after-tax operating income and the net initial investment. 
A) The initial investment and the project's expected useful life. 
B) The discount rate and the net initial investment. 
C) The NPV and the IRR. 
D) The non-uniform cash flows and the net initial investment. 
E) The after-tax operating income and the net initial investment.

Question 12

A manager may reject a project if the AARR of the initial investment is ________ than the minimum accounting rate of return the manager is expected to achieve.

Accepted Answer

A) lower 
B) similar 
C) higher 
D) reduced 
E) decreased 
A) lower 
B) similar 
C) higher 
D) reduced 
E) decreased

Question 13

Cassandra needs to compare the present value of two annuities that she invested in ten years ago.In the first annuity,she invested $40,000 at a PV factor of 6% and in the second annuity she invested $60,000 at a PV of 20%.
Required:
Compute the present value of each annuity.Use Table 4 to find your values.

Accepted Answer

A) $64,000;$102,000 
B) $82,000;$112,000 
C) $294,400;$251,520 
D) $362,200;$481,300 
E) $273,200;$340,000 
A) $64,000;$102,000 
B) $82,000;$112,000 
C) $294,400;$251,520 
D) $362,200;$481,300 
E) $273,200;$340,000

Question 14

The manager at Nielson's Paper purchased a new upgraded machine with an initial investment of $409,000 and forecasted an increase in expected average annual after-tax operating income of $34,400.
Required
Compute the accrual accounting rate of return (AARR).

Accepted Answer

A) AARR=0.065,or 6.5% per year 
B) AARR=0.074,or 7.4%per year 
C) AARR=0.056,or 5.6% per year 
D) AARR=0.084,or 8.4% per year 
E) AARR=0.102,or 10.2% per year 
A) AARR=0.065,or 6.5% per year 
B) AARR=0.074,or 7.4%per year 
C) AARR=0.056,or 5.6% per year 
D) AARR=0.084,or 8.4% per year 
E) AARR=0.102,or 10.2% per year

Question 15

Which of the following is not an advantage of the NPV method?

Accepted Answer

A) Expresses computations in dollars. 
B) Expresses computations in percentages. 
C) The NPV of a project is expressed as a unique number. 
D) Can be used when the IRR varies over the life of a project. 
E) The manager makes accurate assessments of final decision to accept or reject project. 
A) Expresses computations in dollars. 
B) Expresses computations in percentages. 
C) The NPV of a project is expressed as a unique number. 
D) Can be used when the IRR varies over the life of a project. 
E) The manager makes accurate assessments of final decision to accept or reject project.

Question 16

In what stage of the capital budgeting process do managers determine the investment that yields the best and worse returns to the organization?

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 the 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 the alternatives. 
E) Stage 5: Implement the decision,evaluate performance,and learn.

Question 17

________ predicts cash inflows and outflows in real monetary units and uses a real rate as the required rate of return.

Accepted Answer

A) Inflation 
B) Real approach 
C) Inflated return 
D) Deflated return 
E) Nominal approach 
A) Inflation 
B) Real approach 
C) Inflated return 
D) Deflated return 
E) Nominal approach

Question 18

What is the option feature of R&D investments?

Accepted Answer

Real options is an important aspect of R

Question 19

Because cash flows and time value of money are central to capital budgeting decisions,managers regard the AARR method as better than the IRR method.

Accepted Answer

A) True 
 B)False

Question 20

The two DCF methods used to describe are the net present value (NPV)method and the internal rate-of-return method (IRR).

Accepted Answer

A) True 
 B)False

In computer-integrated manufacturing technology (CIM):

A key feature of the discounted cash flow (DCF)method is ________.

The manager at Starfish Manufacturing purchased a new machine with an upgraded feature with an investment of $285,000.The manager forecasted an increase in expected average annual after-tax operating income of $46,000. Required Compute the accrual accounting rate of return (AARR).

The Meredith Organization has an annual cash inflow from operations from its investment in a capital asset of $25,000 each for five years.The corporation's income tax rate is 25%. Required Compute the five years total after-tax cash inflow from operations.

Why do managers use the net present value (NPV)method?

What do managers need to consider about the after-tax cash flow from the current disposal of an old machine?

Projects with longer payback periods provide managers more flexibility because funds for other projects become available later.

There is an inconsistency between using the NPV method as best for capital budgeting decisions and then using a different method to evaluate performance.

Gains or losses on the sale of depreciable assets can be taxed at the same rate as ordinary income.

The ________ calculates the amount of time required for the discounted expected future cash flows to recoup the net initial investment in a project.

When managers calculate the accrual accounting rate of return (AARR),what values should be used?

A manager may reject a project if the AARR of the initial investment is ________ than the minimum accounting rate of return the manager is expected to achieve.

The manager at Nielson's Paper purchased a new upgraded machine with an initial investment of $409,000 and forecasted an increase in expected average annual after-tax operating income of $34,400. Required Compute the accrual accounting rate of return (AARR).

Which of the following is not an advantage of the NPV method?

In what stage of the capital budgeting process do managers determine the investment that yields the best and worse returns to the organization?

________ predicts cash inflows and outflows in real monetary units and uses a real rate as the required rate of return.

What is the option feature of R&D investments?

Because cash flows and time value of money are central to capital budgeting decisions,managers regard the AARR method as better than the IRR method.

The two DCF methods used to describe are the net present value (NPV)method and the internal rate-of-return method (IRR).

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

In computer-integrated manufacturing technology (CIM):

A key feature of the discounted cash flow (DCF)method is ________.

The manager at Starfish Manufacturing purchased a new machine with an upgraded feature with an investment of $285,000.The manager forecasted an increase in expected average annual after-tax operating income of $46,000. Required Compute the accrual accounting rate of return (AARR).

The Meredith Organization has an annual cash inflow from operations from its investment in a capital asset of $25,000 each for five years.The corporation's income tax rate is 25%. Required Compute the five years total after-tax cash inflow from operations.

Why do managers use the net present value (NPV)method?

What do managers need to consider about the after-tax cash flow from the current disposal of an old machine?

Projects with longer payback periods provide managers more flexibility because funds for other projects become available later.

There is an inconsistency between using the NPV method as best for capital budgeting decisions and then using a different method to evaluate performance.

Gains or losses on the sale of depreciable assets can be taxed at the same rate as ordinary income.

The ________ calculates the amount of time required for the discounted expected future cash flows to recoup the net initial investment in a project.

When managers calculate the accrual accounting rate of return (AARR),what values should be used?

A manager may reject a project if the AARR of the initial investment is ________ than the minimum accounting rate of return the manager is expected to achieve.

The manager at Nielson's Paper purchased a new upgraded machine with an initial investment of $409,000 and forecasted an increase in expected average annual after-tax operating income of $34,400. Required Compute the accrual accounting rate of return (AARR).

Which of the following is not an advantage of the NPV method?

In what stage of the capital budgeting process do managers determine the investment that yields the best and worse returns to the organization?

________ predicts cash inflows and outflows in real monetary units and uses a real rate as the required rate of return.

What is the option feature of R&D investments?

Because cash flows and time value of money are central to capital budgeting decisions,managers regard the AARR method as better than the IRR method.

The two DCF methods used to describe are the net present value (NPV)method and the internal rate-of-return method (IRR).

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