Question 1

Below are two potential investment alternatives:
    
-There are two key aspects of capital budgeting: (1) investing decisions and (2)

Accepted Answer

A)  accounting decisions. 
B)  financing decisions. 
C)  discount decisions. 
D)  payback decisions. 
A)  accounting decisions. 
B)  financing decisions. 
C)  discount decisions. 
D)  payback decisions.

Question 2

Alpha Company has the following information:
  
-What is (a)?

Accepted Answer

A)  $23,958 
B)  $22,746 
C)  $ 8,811 
D)  $ 9,662 
A)  $23,958 
B)  $22,746 
C)  $ 8,811 
D)  $ 9,662

Question 3

Discounting

Accepted Answer

A)  is the process of determining value at a future time. 
B)  is the process of converting future cash flows to their present value. 
C)  is a process that doers not consider the time value of money. 
D)  is a process that can only be used for a single amount (not annuities). 
A)  is the process of determining value at a future time. 
B)  is the process of converting future cash flows to their present value. 
C)  is a process that doers not consider the time value of money. 
D)  is a process that can only be used for a single amount (not annuities).

Question 4

The decline in the general purchasing power of the monetary unit

Accepted Answer

The answer of The decline in the general purchasing power...

Question 5

Beta Company has the following information:
  
-What is (f)?

Accepted Answer

A)  $ 3,948 
B)  $35,948 
C)  $ 4,200 
D)  $(6,013) 
A)  $ 3,948 
B)  $35,948 
C)  $ 4,200 
D)  $(6,013)

Question 6

The rate of return used to compute the present value of future cash flows.

Accepted Answer

The answer of The rate of return used to compute...

Question 7

WN Company manufactures high quality Wagnuts. It is a growing company and is therefore considering the purchase of some new equipment to help expand production. The following data are relevant to the decision:   Required: What is the annual net after-tax cash flow generated by the investment?

Accepted Answer

The answer of WN Company manufactures high quality Wagnuts. It...

Question 8

Beta Company has the following information:
  
-What is (d)?

Accepted Answer

A)  Less than 6 percent 
B)  Between 6 and 8 percent 
C)  Between 8 and 10 percent 
D)  Between 10 and 12 percent 
A)  Less than 6 percent 
B)  Between 6 and 8 percent 
C)  Between 8 and 10 percent 
D)  Between 10 and 12 percent

Question 9

Both the payback and the accounting rate-of-return models are attempts to approach capital budgeting systematically.

Accepted Answer

A) True 
 B)False

Question 10

A requirement of Capital Cost Allowance that treats all assets as if they were placed in service at the midpoint of the tax year.

Accepted Answer

The answer of A requirement of Capital Cost Allowance that...

Question 11

Below are two potential investment alternatives:
   Assume straight-line amortization in all computations, and ignore income taxes.
-The accounting rate of return based on INITIAL investment in case B is

Accepted Answer

A)  38.67 percent. 
B)  2.59 percent. 
C)  5.33 percent. 
D)  2.40 percent. 
A)  38.67 percent. 
B)  2.59 percent. 
C)  5.33 percent. 
D)  2.40 percent.

Question 12

Use the following information to answer the next question(s).
Sunny Flowers is considering the purchase of a small business that costs $500,000. Sunny plans to sell stock valued at $250,000. The stock would pay dividends of $20,000 per year. Sunny would borrow the remaining $250,000 from a local bank at 12 percent interest.
The business is expected to generate annual cash inflows of $80,000. Duane plans to operate the business for 15 years and then turn it over to his son.
-The cost of capital for the firm is

Accepted Answer

A)  8%. 
B)  6%. 
C)  10%. 
D)  12%. 
A)  8%. 
B)  6%. 
C)  10%. 
D)  12%.

Question 13

Use the following information regarding a production asset to answer the next question(s).
  
-The annual after-tax operation costs would be

Accepted Answer

A)  $1,000. 
B)  $1,200. 
C)  $1,500. 
D)  $2.000. 
A)  $1,000. 
B)  $1,200. 
C)  $1,500. 
D)  $2.000.

Question 14

Use the following information regarding a production asset to answer the next question(s).
  
-The capital cost allowance for the first year would be

Accepted Answer

A)  $3,750. 
B)  $6,375. 
C)  $7,500. 
D)  $4,463. 
A)  $3,750. 
B)  $6,375. 
C)  $7,500. 
D)  $4,463.

Question 15

In making capital-budgeting decisions, it is relevant to consider

Accepted Answer

A)  future data that will differ among competing alternatives. 
B)  the cash outflows caused by future depreciation deductions. 
C)  the book value of equipment. 
D)  the original cost of currently owned equipment. 
A)  future data that will differ among competing alternatives. 
B)  the cash outflows caused by future depreciation deductions. 
C)  the book value of equipment. 
D)  the original cost of currently owned equipment.

Question 16

Two common methods for comparing alternatives are (1) the total project approach and (2) the conversion approach.

Accepted Answer

A) True 
 B)False

Question 17

Tex Corporation trades in a class 10 (30%) asset during the current year. The opening UCC balance in the class 10 pool is $420,000. Tex trades in an asset for $25,000, which he sets off the $125,000 he pays for a new class 10 asset. The tax marginal rate is 35%. The nominal after-tax rate of return is 10%.
a. Calculate the UCC balance at the end of the year.
b. Calculate the tax shield on the trade in.
c. Calculate the NPV cash outflow on the trade in.

Accepted Answer

a. CCA class 10 @#IMG-DLM& b.

Question 18

Use the following information to answer the next question(s).
Sunny Flowers is considering the purchase of a small business that costs $500,000. Sunny plans to sell stock valued at $250,000. The stock would pay dividends of $20,000 per year. Sunny would borrow the remaining $250,000 from a local bank at 12 percent interest.
The business is expected to generate annual cash inflows of $80,000. Duane plans to operate the business for 15 years and then turn it over to his son.
-Using the cost capital as the discount rate, the net present value of the project is

Accepted Answer

A)  $89,360. 
B)  $108,480. 
C)  $114,680. 
D)  $228,180. 
A)  $89,360. 
B)  $108,480. 
C)  $114,680. 
D)  $228,180.

Question 19

Beta Company has the following information:
  
-What is (c)?

Accepted Answer

A)  $38,599 
B)  $94,800 
C)  $16,273 
D)  $ 5,200 
A)  $38,599 
B)  $94,800 
C)  $16,273 
D)  $ 5,200

Question 20

Alpha Company has the following information:
  
-What is (b)?

Accepted Answer

A)  $ -0- 
B)  $(1,212) 
C)  $16,359 
D)  $14,296 
A)  $ -0- 
B)  $(1,212) 
C)  $16,359 
D)  $14,296

Below are two potential investment alternatives: -There are two key aspects of capital budgeting: (1) investing decisions and (2)

Alpha Company has the following information: -What is (a)?

Discounting

The decline in the general purchasing power of the monetary unit

Beta Company has the following information: -What is (f)?

The rate of return used to compute the present value of future cash flows.

WN Company manufactures high quality Wagnuts. It is a growing company and is therefore considering the purchase of some new equipment to help expand production. The following data are relevant to the decision: Required: What is the annual net after-tax cash flow generated by the investment?

Beta Company has the following information: -What is (d)?

Both the payback and the accounting rate-of-return models are attempts to approach capital budgeting systematically.

A requirement of Capital Cost Allowance that treats all assets as if they were placed in service at the midpoint of the tax year.

Below are two potential investment alternatives: Assume straight-line amortization in all computations, and ignore income taxes. -The accounting rate of return based on INITIAL investment in case B is

Use the following information regarding a production asset to answer the next question(s). -The annual after-tax operation costs would be

Use the following information regarding a production asset to answer the next question(s). -The capital cost allowance for the first year would be

In making capital-budgeting decisions, it is relevant to consider

Two common methods for comparing alternatives are (1) the total project approach and (2) the conversion approach.

Beta Company has the following information: -What is (c)?

Alpha Company has the following information: -What is (b)?

Management Accounting and Management Decisions

Cost Behaviour and Cost-Volume Relationships

Measurement of Cost Behaviour

Cost Management Systems

Cost Allocation and Activity-Based Costing Systems

Job-Costing Systems

Process-Costing Systems

Relevant Information and Decision Making: Marketing Decisions

Relevant Information and Decision Making: Production Decisions

The Master Budget

Flexible Budgets and Variance Analysis

Management Control Systems, the Balanced Scorecard, and Responsibility Accounting

Management Control in Decentralized Organizations

Filters

Exam 10: Capital Budgeting Decisions

Below are two potential investment alternatives: -There are two key aspects of capital budgeting: (1) investing decisions and (2)

Alpha Company has the following information: -What is (a)?

Discounting

The decline in the general purchasing power of the monetary unit

Beta Company has the following information: -What is (f)?

The rate of return used to compute the present value of future cash flows.

WN Company manufactures high quality Wagnuts. It is a growing company and is therefore considering the purchase of some new equipment to help expand production. The following data are relevant to the decision: Required: What is the annual net after-tax cash flow generated by the investment?

Beta Company has the following information: -What is (d)?

Both the payback and the accounting rate-of-return models are attempts to approach capital budgeting systematically.

A requirement of Capital Cost Allowance that treats all assets as if they were placed in service at the midpoint of the tax year.

Below are two potential investment alternatives: Assume straight-line amortization in all computations, and ignore income taxes. -The accounting rate of return based on INITIAL investment in case B is

Use the following information regarding a production asset to answer the next question(s). -The annual after-tax operation costs would be

Use the following information regarding a production asset to answer the next question(s). -The capital cost allowance for the first year would be

In making capital-budgeting decisions, it is relevant to consider

Two common methods for comparing alternatives are (1) the total project approach and (2) the conversion approach.

Beta Company has the following information: -What is (c)?

Alpha Company has the following information: -What is (b)?

Management Accounting and Management Decisions

Cost Behaviour and Cost-Volume Relationships

Measurement of Cost Behaviour

Cost Management Systems

Cost Allocation and Activity-Based Costing Systems

Job-Costing Systems

Process-Costing Systems

Relevant Information and Decision Making: Marketing Decisions

Relevant Information and Decision Making: Production Decisions

The Master Budget

Flexible Budgets and Variance Analysis

Management Control Systems, the Balanced Scorecard, and Responsibility Accounting

Management Control in Decentralized Organizations

Filters