Question 1

The payback method ignores cash flows after the payback period.

Accepted Answer

A) True 
 B)False

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

The manager at Harrison's Paper Service needs to assess the net increase in income the company should experience after the investment in a new machine.The operating cash inflows from the investment of $185,000,with an additional depreciation deduction of $111,000.The company is taxed at 40%.
Required
Compute the increase in net income.

Accepted Answer

A) $56,200 
B) $14,300 
C) $44,400 
D) $32,300 
E) $23,500 
A) $56,200 
B) $14,300 
C) $44,400 
D) $32,300 
E) $23,500

Question 4

Quantifying the benefits of computer-integrated manufacturing (CIM)requires managers to understand how quickly consumer demand will change in the future.

Accepted Answer

A) True 
 B)False

Question 5

The ________ measures the time it will take to recoup,in the form of expected future cash flows,the net initial investment in a project.

Accepted Answer

A) income tax 
B) payback method 
C) net present value 
D) internal rate of return 
E) external rate of return 
A) income tax 
B) payback method 
C) net present value 
D) internal rate of return 
E) external rate of return

Question 6

The manager at Shriver Industrial,a laundry detergent manufacturer,needs to purchase a new machine.The net initial investment of the plan is $291,000.The machine is expected to generate $80,000 in uniform cash flow each year and it has a five-year expected useful life.
Required
Compute the payback period.

Accepted Answer

A) 4.8 years 
B) 2.5 years 
C) 3.6 years 
D) 4.0 years 
E) 3.5 years 
A) 4.8 years 
B) 2.5 years 
C) 3.6 years 
D) 4.0 years 
E) 3.5 years

Question 7

In performance evaluations,it is important for managers to ensure that the method of evaluation does not conflict with the ________ method for making capital-budgeting decisions.

Accepted Answer

A) IR 
B) IRR 
C) NPV 
D) AARR 
E) IRRR 
A) IR 
B) IRR 
C) NPV 
D) AARR 
E) IRRR

Question 8

In-a-Jiff Tire Service owner,Jeffery Haberton,has the opportunity to invest $360,000 at 8% interest during a one-year period.After the first year,the value of the investment is expected to be $28,800.According to the time value of money,how much would the same $360,000 be worth in one year if it is not invested at 8%?

Accepted Answer

A) $300,000 
B) $308,000 
C) $333,333 
D) $346,800 
E) $360,000 
A) $300,000 
B) $308,000 
C) $333,333 
D) $346,800 
E) $360,000

Question 9

________ is the process of making long-run planning decisions for investments in projects.

Accepted Answer

A) Payback 
B) Predictions 
C) Capital budgeting 
D) Initial investment 
E) Obtain information 
A) Payback 
B) Predictions 
C) Capital budgeting 
D) Initial investment 
E) Obtain information

Question 10

In what stage of the capital budgeting process do managers forecast all potential cash flows attributable to the alternative projects?

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 11

In which stage of the capital budgeting process begins the choice to manage the project?

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 12

Which of the following is not true about capital budgeting projects?

Accepted Answer

A) The building projects in capital-budget projects are less complex. 
B) The building projects are more complex in capital-budget projects. 
C) The managers engage in postinvestment audits when they implement capital-budget projects. 
D) Building projects that involve the purchase of equipment are more complex. 
E) Monitoring investment schedules and budgets is critical to success. 
A) The building projects in capital-budget projects are less complex. 
B) The building projects are more complex in capital-budget projects. 
C) The managers engage in postinvestment audits when they implement capital-budget projects. 
D) Building projects that involve the purchase of equipment are more complex. 
E) Monitoring investment schedules and budgets is critical to success.

Question 13

What is CIM technology? What are its benefits?

Accepted Answer

In CIM,computers give instructions that

Question 14

Johnny won the state lottery.What formula would he use to find the future value of his winnings?

Accepted Answer

A) P=S / (1 +/ r)n 
B) S=P × (1+r)n 
C) F=S × (2-r) 
D) P=N × (S-ar3)2 
E) r=(P × r +S)n 
A) P=S / (1 +/ r)n 
B) S=P × (1+r)n 
C) F=S × (2-r) 
D) P=N × (S-ar3)2 
E) r=(P × r +S)n

Question 15

Which of the following is the formula to compute the nominal rate of return?

Accepted Answer

A) Nominal rate = (1 + Real rate)(1 + Inflation rate)- 1 
B) Nominal rate = (1 - Real rate)(1 - Inflation rate)- 1 
C) Nominal rate = (1 × Real rate)(1 + Inflation rate)+ 1 
D) Nominal rate = (1 / Real rate)+ (1 + Inflation rate)/ 1 
E) Nominal rate = (1 - Real rate)/ (1 - Inflation rate)+ 1 
A) Nominal rate = (1 + Real rate)(1 + Inflation rate)- 1 
B) Nominal rate = (1 - Real rate)(1 - Inflation rate)- 1 
C) Nominal rate = (1 × Real rate)(1 + Inflation rate)+ 1 
D) Nominal rate = (1 / Real rate)+ (1 + Inflation rate)/ 1 
E) Nominal rate = (1 - Real rate)/ (1 - Inflation rate)+ 1

Question 16

Managers solving capital budgeting problems typically use a calculator,or a computer program,to provide the internal rate of return.

Accepted Answer

A) True 
 B)False

Question 17

________ is the decline in the general purchasing power of the monetary unit.

Accepted Answer

A) Inflation 
B) Deflation 
C) Real rate of return 
D) Nominal rate of return 
E) Forecasted rate of return 
A) Inflation 
B) Deflation 
C) Real rate of return 
D) Nominal rate of return 
E) Forecasted rate of return

Question 18

In what stage of the capital-budgeting process do managers make the investment and track realized cash flows?

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 19

________ predicts cash inflows and outflows in nominal monetary units and uses a nominal rate as the real 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 20

Bridgett's Beauty Spa needs to purchase a new extra deluxe machine to implement spa services.The initial investment on this new ultra jacuzzi is $85,000.The machine is expected to generate $65,000 in uniform cash flow each year and it has a five-year expected useful life.
Required
Compute the payback period.

Accepted Answer

A) 1 year 
B) 1.31 years 
C) 1.51 years 
D) 1.61 years 
E) 1.71 years 
A) 1 year 
B) 1.31 years 
C) 1.51 years 
D) 1.61 years 
E) 1.71 years

The payback method ignores cash flows after the payback period.

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

Quantifying the benefits of computer-integrated manufacturing (CIM)requires managers to understand how quickly consumer demand will change in the future.

The ________ measures the time it will take to recoup,in the form of expected future cash flows,the net initial investment in a project.

In performance evaluations,it is important for managers to ensure that the method of evaluation does not conflict with the ________ method for making capital-budgeting decisions.

________ is the process of making long-run planning decisions for investments in projects.

In what stage of the capital budgeting process do managers forecast all potential cash flows attributable to the alternative projects?

In which stage of the capital budgeting process begins the choice to manage the project?

Which of the following is not true about capital budgeting projects?

What is CIM technology? What are its benefits?

Johnny won the state lottery.What formula would he use to find the future value of his winnings?

Which of the following is the formula to compute the nominal rate of return?

Managers solving capital budgeting problems typically use a calculator,or a computer program,to provide the internal rate of return.

________ is the decline in the general purchasing power of the monetary unit.

In what stage of the capital-budgeting process do managers make the investment and track realized cash flows?

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

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

The payback method ignores cash flows after the payback period.

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

Quantifying the benefits of computer-integrated manufacturing (CIM)requires managers to understand how quickly consumer demand will change in the future.

The ________ measures the time it will take to recoup,in the form of expected future cash flows,the net initial investment in a project.

In performance evaluations,it is important for managers to ensure that the method of evaluation does not conflict with the ________ method for making capital-budgeting decisions.

________ is the process of making long-run planning decisions for investments in projects.

In what stage of the capital budgeting process do managers forecast all potential cash flows attributable to the alternative projects?

In which stage of the capital budgeting process begins the choice to manage the project?

Which of the following is not true about capital budgeting projects?

What is CIM technology? What are its benefits?

Johnny won the state lottery.What formula would he use to find the future value of his winnings?

Which of the following is the formula to compute the nominal rate of return?

Managers solving capital budgeting problems typically use a calculator,or a computer program,to provide the internal rate of return.

________ is the decline in the general purchasing power of the monetary unit.

In what stage of the capital-budgeting process do managers make the investment and track realized cash flows?

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

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