Question 1

Average rate of return equals estimated average annual income divided by average investment.

Accepted Answer

A) True 
 B)False

Question 2

The cash payback period for this investment is:

Accepted Answer

A) 5 years. 
B) 3 years. 
C) 2 years. 
D) 4 years. 
A) 5 years. 
B) 3 years. 
C) 2 years. 
D) 4 years.

Question 3

Finer Company is considering the acquisition of a machine that costs $150,000.The machine is expected to have a useful life of 6 years,a negligible residual value,an annual cash flow of $30,000,and annual operating income of $35,000.What is the estimated cash payback period for the machine?

Accepted Answer

A) 4.3 years 
B) 3 years 
C) 5 years 
D) 6 years 
A) 4.3 years 
B) 3 years 
C) 5 years 
D) 6 years

Question 4

The internal rate of return method is used to analyze a $831,500 capital investment proposal with annual net cash flows of $250,000 for each of the six years of its useful life.

Accepted Answer

The answer of The internal rate of return method is...

Question 5

The internal rate of return method of analyzing capital investment proposals uses the present value concept to compute the rate of return expected from the proposals.

Accepted Answer

A) True 
 B)False

Question 6

In capital rationing,alternative proposals are initially screened by establishing minimum standards using the cash payback and the average rate of return methods.

Accepted Answer

A) True 
 B)False

Question 7

A present value index can be used to rank competing capital investment proposals when the net present value method is used.

Accepted Answer

A) True 
 B)False

Question 8

By converting dollars to be received in the future into current dollars,the present value methods take into consideration that money:

Accepted Answer

A) has an international rate of exchange. 
B) is the language of business. 
C) is the measure of assets,liabilities,and stockholders' equity on financial statements. 
D) has a time value. 
A) has an international rate of exchange. 
B) is the language of business. 
C) is the measure of assets,liabilities,and stockholders' equity on financial statements. 
D) has a time value.

Question 9

When evaluating a proposal by use of the net present value method,if there is an excess of the present value of future cash inflows over the amount to be invested,the rate of return on the proposal is less than the rate used in the analysis.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following is a present value method of analyzing capital investment proposals?

Accepted Answer

A) Average rate of return 
B) Cash payback method 
C) Accounting rate of return 
D) Internal rate of return 
A) Average rate of return 
B) Cash payback method 
C) Accounting rate of return 
D) Internal rate of return

Question 11

Which of the following is a qualitative consideration that influences capital investments analysis?

Accepted Answer

A) Time value of money 
B) Internal rate of return 
C) Changes in price level 
D) Manufacturing flexibility 
A) Time value of money 
B) Internal rate of return 
C) Changes in price level 
D) Manufacturing flexibility

Question 12

If a proposed expenditure of $80,000 for a fixed asset with a 4-year life has an annual expected net cash flow and net income of $32,000 and $12,000,respectively,the cash payback period is 2.5 years.

Accepted Answer

A) True 
 B)False

Question 13

Periods experiencing increase in price levels are known as periods of:

Accepted Answer

A) inflation. 
B) recession. 
C) depression. 
D) deflation. 
A) inflation. 
B) recession. 
C) depression. 
D) deflation.

Question 14

Proposals L and K each cost $500,000,have 6-year lives,and have expected total cash flows of $750,000.Proposal L is expected to provide equal annual net cash flows of $125,000,while the net cash flows for Proposal K are as follows:

Accepted Answer

Proposal L: $500,000/$125,000

Question 15

In capital rationing,alternative proposals that survive initial screening and further analysis using present value methods are normally evaluated in terms of:

Accepted Answer

A) net income. 
B) qualitative factors. 
C) maximum cost. 
D) net cash flow. 
A) net income. 
B) qualitative factors. 
C) maximum cost. 
D) net cash flow.

Question 16

The process by which management allocates available investment funds among competing investment proposals is called:

Accepted Answer

A) investment capital management. 
B) capital budgeting. 
C) cost-volume-profit analysis. 
D) capital rationing. 
A) investment capital management. 
B) capital budgeting. 
C) cost-volume-profit analysis. 
D) capital rationing.

Question 17

A $350,000 capital investment proposal has an estimated life of four years and no residual value.The estimated net cash flows are as follows:

Accepted Answer

Present Value Net Present Value of Year

Question 18

A qualitative characteristic that influences capital investment analysis is manufacturing productivity.

Accepted Answer

A) True 
 B)False

Question 19

When evaluating a proposal by use of the net present value method,if there is an excess of the present value of future cash inflows over the amount to be invested,the rate of return on the proposal exceeds the rate used in the analysis.

Accepted Answer

A) True 
 B)False

Question 20

A series of equal cash flows at fixed intervals is termed as a(n):

Accepted Answer

A) present value index. 
B) price-level index. 
C) net cash flow. 
D) annuity. 
A) present value index. 
B) price-level index. 
C) net cash flow. 
D) annuity.

Average rate of return equals estimated average annual income divided by average investment.

The cash payback period for this investment is:

Finer Company is considering the acquisition of a machine that costs $150,000.The machine is expected to have a useful life of 6 years,a negligible residual value,an annual cash flow of $30,000,and annual operating income of $35,000.What is the estimated cash payback period for the machine?

The internal rate of return method is used to analyze a $831,500 capital investment proposal with annual net cash flows of $250,000 for each of the six years of its useful life.

The internal rate of return method of analyzing capital investment proposals uses the present value concept to compute the rate of return expected from the proposals.

In capital rationing,alternative proposals are initially screened by establishing minimum standards using the cash payback and the average rate of return methods.

A present value index can be used to rank competing capital investment proposals when the net present value method is used.

By converting dollars to be received in the future into current dollars,the present value methods take into consideration that money:

When evaluating a proposal by use of the net present value method,if there is an excess of the present value of future cash inflows over the amount to be invested,the rate of return on the proposal is less than the rate used in the analysis.

Which of the following is a present value method of analyzing capital investment proposals?

Which of the following is a qualitative consideration that influences capital investments analysis?

If a proposed expenditure of $80,000 for a fixed asset with a 4-year life has an annual expected net cash flow and net income of $32,000 and $12,000,respectively,the cash payback period is 2.5 years.

Periods experiencing increase in price levels are known as periods of:

Proposals L and K each cost $500,000,have 6-year lives,and have expected total cash flows of $750,000.Proposal L is expected to provide equal annual net cash flows of $125,000,while the net cash flows for Proposal K are as follows:

In capital rationing,alternative proposals that survive initial screening and further analysis using present value methods are normally evaluated in terms of:

The process by which management allocates available investment funds among competing investment proposals is called:

A $350,000 capital investment proposal has an estimated life of four years and no residual value.The estimated net cash flows are as follows:

A qualitative characteristic that influences capital investment analysis is manufacturing productivity.

When evaluating a proposal by use of the net present value method,if there is an excess of the present value of future cash inflows over the amount to be invested,the rate of return on the proposal exceeds the rate used in the analysis.

A series of equal cash flows at fixed intervals is termed as a(n):

The Role of Accounting in Business

Basic Accounting Concepts

Accrual Accounting Concepts

Accounting for Merchandising Businesses

Sarbanes-Oxley, internal Control, and Cash

Receivables and Inventories

Fixed Assets and Intangible Assets

Liabilities and Stockholders Equity

Financial Statement Analysis

Accounting Systems for Manufacturing Businesses

Cost Behavior and Cost-Volume-Profit Analysis

Differential Analysis and Product Pricing

Budgeting and Standard Cost Systems

Performance Evaluation for Decentralized Operations

Filters

Exam 15: Capital Investment Analysis

Average rate of return equals estimated average annual income divided by average investment.

The cash payback period for this investment is:

Finer Company is considering the acquisition of a machine that costs $150,000.The machine is expected to have a useful life of 6 years,a negligible residual value,an annual cash flow of $30,000,and annual operating income of $35,000.What is the estimated cash payback period for the machine?

The internal rate of return method is used to analyze a $831,500 capital investment proposal with annual net cash flows of $250,000 for each of the six years of its useful life.

The internal rate of return method of analyzing capital investment proposals uses the present value concept to compute the rate of return expected from the proposals.

In capital rationing,alternative proposals are initially screened by establishing minimum standards using the cash payback and the average rate of return methods.

A present value index can be used to rank competing capital investment proposals when the net present value method is used.

By converting dollars to be received in the future into current dollars,the present value methods take into consideration that money:

When evaluating a proposal by use of the net present value method,if there is an excess of the present value of future cash inflows over the amount to be invested,the rate of return on the proposal is less than the rate used in the analysis.

Which of the following is a present value method of analyzing capital investment proposals?

Which of the following is a qualitative consideration that influences capital investments analysis?

If a proposed expenditure of $80,000 for a fixed asset with a 4-year life has an annual expected net cash flow and net income of $32,000 and $12,000,respectively,the cash payback period is 2.5 years.

Periods experiencing increase in price levels are known as periods of:

Proposals L and K each cost $500,000,have 6-year lives,and have expected total cash flows of $750,000.Proposal L is expected to provide equal annual net cash flows of $125,000,while the net cash flows for Proposal K are as follows:

In capital rationing,alternative proposals that survive initial screening and further analysis using present value methods are normally evaluated in terms of:

The process by which management allocates available investment funds among competing investment proposals is called:

A $350,000 capital investment proposal has an estimated life of four years and no residual value.The estimated net cash flows are as follows:

A qualitative characteristic that influences capital investment analysis is manufacturing productivity.

When evaluating a proposal by use of the net present value method,if there is an excess of the present value of future cash inflows over the amount to be invested,the rate of return on the proposal exceeds the rate used in the analysis.

A series of equal cash flows at fixed intervals is termed as a(n):

The Role of Accounting in Business

Basic Accounting Concepts

Accrual Accounting Concepts

Accounting for Merchandising Businesses

Sarbanes-Oxley, internal Control, and Cash

Receivables and Inventories

Fixed Assets and Intangible Assets

Liabilities and Stockholders Equity

Financial Statement Analysis

Accounting Systems for Manufacturing Businesses

Cost Behavior and Cost-Volume-Profit Analysis

Differential Analysis and Product Pricing

Budgeting and Standard Cost Systems

Performance Evaluation for Decentralized Operations

Filters