Question 1

Match each item with the correct statement below.
-comparison of actual benefits and costs of a project with the expected benefits and costs

Accepted Answer

A) Payback period 
B) Accounting rate of return 
C) Net present value 
D) Internal rate of return 
E) Discount rate
F)Annuity
G)Post-audit
H)Compounding of interest 
A) Payback period 
B) Accounting rate of return 
C) Net present value 
D) Internal rate of return 
E) Discount rate
F)Annuity
G)Post-audit
H)Compounding of interest

Question 2

Figure 14-8.Present value of an Annuity of $1 in Arrears
  
-Refer to Figure 14-8. Sawyer Company is considering a project with an initial investment of $226,000 that will yield annual net cash flows of $40,000, and will be depreciated at $22,600 per year over its ten year life. What is the internal rate of return?

Accepted Answer

A)  6% 
B)  8% 
C)  10% 
D)  12% 
E)  14% 
A)  6% 
B)  8% 
C)  10% 
D)  12% 
E)  14%

Question 3

If the internal rate of return (IRR) is less than the required rate of return, the project is __________.

Accepted Answer

The answer of If the internal rate of return (IRR)...

Question 4

The interest rate that sets the present value of a project's cash inflows equal to the present value of the project's cost is called the internal rate of return.

Accepted Answer

A) True 
 B)False

Question 5

_______________________ ignore the time value of money.

Accepted Answer

Nondiscoun

Question 6

Figure 14-6.Present value of $1
   Present value of an Annuity of $1
  
-Refer to Figure 14-6. Morgan Clinical Practice is considering an investment in new imaging equipment that will cost $400,000. The equipment is expected to yield cash inflows of $80,000 per year for a six year period. Morgan set a required rate of return at 10%. What is the net present value of the investment? (Note: there may be a rounding error depending on the table you use to compute your answer. Choose the answer closest to the one you calculate.)

Accepted Answer

A)  $51,600 
B)  ($51,600) 
C)  $348,400 
D)  ($348,600) 
E)  $451,600 
A)  $51,600 
B)  ($51,600) 
C)  $348,400 
D)  ($348,600) 
E)  $451,600

Question 7

Figure 14-4.Sony Lavery is considering investing $45,000 in a project with the following cash revenues and expenses:
  
-Refer to Figure 14-4. Assuming straight-line depreciation over 8 years, what is the payback period for the project?

Accepted Answer

A)  between 4 and 5 years 
B)  between 2 and 3 years 
C)  between 5 and 6 years 
D)  between 7 and 8 years 
E)  between 6 and 7 years 
A)  between 4 and 5 years 
B)  between 2 and 3 years 
C)  between 5 and 6 years 
D)  between 7 and 8 years 
E)  between 6 and 7 years

Question 8

What are some reasons why firms use the payback period model in capital investment decision making?

Accepted Answer

Commonly c

Question 9

Only accounting rate of return ignores the time value of money.

Accepted Answer

A) True 
 B)False

Question 10

Two discounting models for capital investment decision making are net present value and internal rate of return.

Accepted Answer

A) True 
 B)False

Question 11

An investment of $5,000 provides an average net cash flows of $320 with zero salvage value. Depreciation is $35 per year. The accounting rate of return using the original investment is

Accepted Answer

A)  4.0% 
B)  5.1% 
C)  5.7% 
D)  3.2% 
E)  2.4% 
A)  4.0% 
B)  5.1% 
C)  5.7% 
D)  3.2% 
E)  2.4%

Question 12

For independent projects, net present value analysis and internal rate of return analysis yield the same decision.

Accepted Answer

A) True 
 B)False

Question 13

What is a capital investment decision? Give an example.

Accepted Answer

A capital investment decision is one tha

Question 14

The internal rate of return is the least widely used of the capital investment techniques.

Accepted Answer

A) True 
 B)False

Question 15

The difference between the present value of the cash inflows and the outflows associated with a project is known as the ___________________.

Accepted Answer

The answer of The difference between the present value of...

Question 16

Match each item with the correct statement below.
-can be used to determine whether or not an investment will negatively affect key financial ratios

Accepted Answer

A) Payback period 
B) Accounting rate of return 
C) Net present value 
D) Internal rate of return 
E) Discount rate
F)Annuity
G)Post-audit
H)Compounding of interest 
A) Payback period 
B) Accounting rate of return 
C) Net present value 
D) Internal rate of return 
E) Discount rate
F)Annuity
G)Post-audit
H)Compounding of interest

Question 17

Billings Office Services is considering the purchase of a new computer system to replace the one in operation. Data on the new computer system are:
   If the existing computer system is kept and used, it would require the purchase of additional hardware a year from now costing $2,000. After using the system for five years, the salvage value would be $300. Additional information on the existing system is:
   The company uses the straight-line method of depreciation.
Required: Should the new system be purchased? Why or why not?

Accepted Answer

@#IMG-DLM& Positive net present value in

Question 18

One way to use the payback period is to set a maximum payback period for all projects and to reject any project that exceeds this level.

Accepted Answer

A) True 
 B)False

Question 19

A firm is evaluating a project that has a net present value of $0 when a discount rate of 8% is used. A discount rate of 6% will result in a

Accepted Answer

A)  negative net present value. 
B)  positive net present value. 
C)  net present value of $0. 
D)  The question cannot be answered based upon the information provided. 
A)  negative net present value. 
B)  positive net present value. 
C)  net present value of $0. 
D)  The question cannot be answered based upon the information provided.

Question 20

The two major categories of capital investment decision models are independent and mutually exclusive.

Accepted Answer

A) True 
 B)False

Match each item with the correct statement below. -comparison of actual benefits and costs of a project with the expected benefits and costs

If the internal rate of return (IRR) is less than the required rate of return, the project is __________.

The interest rate that sets the present value of a project's cash inflows equal to the present value of the project's cost is called the internal rate of return.

_______________________ ignore the time value of money.

Figure 14-4.Sony Lavery is considering investing $45,000 in a project with the following cash revenues and expenses: -Refer to Figure 14-4. Assuming straight-line depreciation over 8 years, what is the payback period for the project?

What are some reasons why firms use the payback period model in capital investment decision making?

Only accounting rate of return ignores the time value of money.

Two discounting models for capital investment decision making are net present value and internal rate of return.

An investment of $5,000 provides an average net cash flows of $320 with zero salvage value. Depreciation is $35 per year. The accounting rate of return using the original investment is

For independent projects, net present value analysis and internal rate of return analysis yield the same decision.

What is a capital investment decision? Give an example.

The internal rate of return is the least widely used of the capital investment techniques.

The difference between the present value of the cash inflows and the outflows associated with a project is known as the ___________________.

Match each item with the correct statement below. -can be used to determine whether or not an investment will negatively affect key financial ratios

One way to use the payback period is to set a maximum payback period for all projects and to reject any project that exceeds this level.

A firm is evaluating a project that has a net present value of $0 when a discount rate of 8% is used. A discount rate of 6% will result in a

The two major categories of capital investment decision models are independent and mutually exclusive.

Introduction to Managerial Accounting

Basic Managerial Accounting Concepts

Cost Behavior

Cost-Volume-Profit Analysis: a Managerial Planning Tool

Job-Order Costing

Process Costing

Activity-Based Costing and Management

Absorption and Variable Costing, and Inventory Management

Profit Planning

Standard Costing: a Managerial Control Tool

Flexible Budgets and Overhead Analysis

Performance Evaluation and Decentralization

Short-Run Decision Making: Relevant Costing

Statement of Cash Flows

Financial Statement Analysis

Filters

Exam 14: Capital Investment Decisions

Match each item with the correct statement below. -comparison of actual benefits and costs of a project with the expected benefits and costs

If the internal rate of return (IRR) is less than the required rate of return, the project is __________.

The interest rate that sets the present value of a project's cash inflows equal to the present value of the project's cost is called the internal rate of return.

_______________________ ignore the time value of money.

Figure 14-4.Sony Lavery is considering investing $45,000 in a project with the following cash revenues and expenses: -Refer to Figure 14-4. Assuming straight-line depreciation over 8 years, what is the payback period for the project?

What are some reasons why firms use the payback period model in capital investment decision making?

Only accounting rate of return ignores the time value of money.

Two discounting models for capital investment decision making are net present value and internal rate of return.

An investment of $5,000 provides an average net cash flows of $320 with zero salvage value. Depreciation is $35 per year. The accounting rate of return using the original investment is

For independent projects, net present value analysis and internal rate of return analysis yield the same decision.

What is a capital investment decision? Give an example.

The internal rate of return is the least widely used of the capital investment techniques.

The difference between the present value of the cash inflows and the outflows associated with a project is known as the ___________________.

Match each item with the correct statement below. -can be used to determine whether or not an investment will negatively affect key financial ratios

One way to use the payback period is to set a maximum payback period for all projects and to reject any project that exceeds this level.

A firm is evaluating a project that has a net present value of $0 when a discount rate of 8% is used. A discount rate of 6% will result in a

The two major categories of capital investment decision models are independent and mutually exclusive.

Introduction to Managerial Accounting

Basic Managerial Accounting Concepts

Cost Behavior

Cost-Volume-Profit Analysis: a Managerial Planning Tool

Job-Order Costing

Process Costing

Activity-Based Costing and Management

Absorption and Variable Costing, and Inventory Management

Profit Planning

Standard Costing: a Managerial Control Tool

Flexible Budgets and Overhead Analysis

Performance Evaluation and Decentralization

Short-Run Decision Making: Relevant Costing

Statement of Cash Flows

Financial Statement Analysis

Filters