Question 1

What is the incremental cash outlay now for the purchase of the new van?

Accepted Answer

A)  $17,000. 
B)  $19,000. 
C)  $20,000. 
D)  $21,000. 
A)  $17,000. 
B)  $19,000. 
C)  $20,000. 
D)  $21,000.

Question 2

(Appendix 13B)Last year,the sales at Jersey Company were $200,000 and were all cash sales.The tax-deductible expenses at Jersey were $125,000 and were all cash expenses.The tax rate was 30%.What was the after-tax net cash inflow at Jersey last year from these operations?

Accepted Answer

A)  $22,500. 
B)  $37,500. 
C)  $52,500. 
D)  $60,000. 
A)  $22,500. 
B)  $37,500. 
C)  $52,500. 
D)  $60,000.

Question 3

(Appendix 13A and 13B)The present value of the total after-tax net cash inflows (outflows),excluding any CCA tax shield,in Year 4 is closest to which of the following? (Do not round your intermediate. )

Accepted Answer

A)  ($7,105). 
B)  $23,684. 
C)  $35,525. 
D)  $38,269. 
A)  ($7,105). 
B)  $23,684. 
C)  $35,525. 
D)  $38,269.

Question 4

(Appendix 13A)White Company's required rate of return on capital budgeting projects is 12%.The company is considering an investment opportunity that would yield a cash flow of $10,000 in five years.What is the most that the company should be willing to invest in this project? (Ignore income taxes in this problem. )(Round your PV factor to 5 decimal places and final answer to nearest whole dollar amount. )

Accepted Answer

A)  $2,774. 
B)  $5,674. 
C)  $17,637. 
D)  $36,050. 
A)  $2,774. 
B)  $5,674. 
C)  $17,637. 
D)  $36,050.

Question 5

(Appendix 13B)Suppose a machine costs $20,000 now,has an expected life of eight years,and will require a $7,000 overhaul at the end of the third year.If the tax rate is 40%,what would be the after-tax cost of this overhaul?

Accepted Answer

A)  $2,800. 
B)  $4,200. 
C)  $8,000. 
D)  $12,000. 
A)  $2,800. 
B)  $4,200. 
C)  $8,000. 
D)  $12,000.

Question 6

(Appendix 13B)A company had tax-deductible cash expenses of $650,000 last year,and the tax rate was 30%.What was the after-tax net cash outflow for these expenses?

Accepted Answer

A)  $195,000. 
B)  $390,000. 
C)  $455,000. 
D)  $650,000. 
A)  $195,000. 
B)  $390,000. 
C)  $455,000. 
D)  $650,000.

Question 7

(Appendix 13A and 13B)A company needs an increase in working capital of $20,000 in a project that will last four years.The company's tax rate is 30%,and its discount rate is 10%.What is the approximate present value of the working capital to be released at the end of the project? (Do not round your intermediate calculations and round the final answer to the nearest whole dollar. )

Accepted Answer

A)  $6,000. 
B)  $9,562. 
C)  $13,660. 
D)  $14,000. 
A)  $6,000. 
B)  $9,562. 
C)  $13,660. 
D)  $14,000.

Question 8

(Appendix 13A and 13B)A company needs an increase in working capital of $50,000 in a project that will last four years.The company's tax rate is 30%,and its discount rate is 8%.What is the approximate present value of the working capital to be released at the end of the project (Do not round your intermediate calculations and round the final answer to the nearest whole dollar. )?

Accepted Answer

A)  $15,000. 
B)  $25,726. 
C)  $35,000. 
D)  $36,751. 
A)  $15,000. 
B)  $25,726. 
C)  $35,000. 
D)  $36,751.

Question 9

(Appendix 13B)Suppose a machine that costs $80,000 has a useful life of ten years.Also suppose that capital cost allowance (CCA)deduction on the machine is $8,000 in year 4.The tax rate is 40%.What would be the tax savings from the CCA tax shield in year 4?

Accepted Answer

A)  $4,800 outflow. 
B)  $3,200 outflow. 
C)  $3,200 inflow. 
D)  $4,800 inflow. 
A)  $4,800 outflow. 
B)  $3,200 outflow. 
C)  $3,200 inflow. 
D)  $4,800 inflow.

Question 10

The payback period would be closest to which of the following?

Accepted Answer

A)  2.90 years. 
B)  3.00 years. 
C)  3.33 years. 
D)  8.00 years. 
A)  2.90 years. 
B)  3.00 years. 
C)  3.33 years. 
D)  8.00 years.

Question 11

(Appendix 13A)The following data pertain to an investment in equipment:  
At the completion of the project,the working capital will be released for use elsewhere.What is the net present value of the project,using a discount rate of 10%? (Ignore income taxes in this problem. )(Do not round your intermediate calculations and round the final answer to the nearest whole dollar. )

Accepted Answer

A)  $603. 
B)  $126. 
C)  ($1,729). 
D)  ($517). 
A)  $603. 
B)  $126. 
C)  ($1,729). 
D)  ($517).

Question 12

(Appendix 13A)An increase in the discount rate will result in an increase in the present value of a given cash flow.

Accepted Answer

A) True 
 B)False

Question 13

(Appendix 13A)The Baker Company purchased a piece of equipment with the following expected results:  
What was the initial cost of the equipment? (Ignore income taxes in this problem. )(Round your PV factor to 5 decimal places and final answer to nearest whole dollar amount. )

Accepted Answer

A)  $180,230. 
B)  $190,630. 
C)  $350,000. 
D)  Cannot be determined from the information given. 
A)  $180,230. 
B)  $190,630. 
C)  $350,000. 
D)  Cannot be determined from the information given.

Question 14

(Appendix 13B)Last year,a firm had taxable cash receipts of $800,000,and the tax rate was 30%.What was the after-tax net cash inflow from these receipts?

Accepted Answer

A)  $240,000. 
B)  $560,000. 
C)  $640,000. 
D)  $800,000. 
A)  $240,000. 
B)  $560,000. 
C)  $640,000. 
D)  $800,000.

Question 15

When using the internal rate of return method to evaluate investment projects,if the internal rate of return is less than the required rate of return,the project should be accepted.

Accepted Answer

A) True 
 B)False

Question 16

(Appendix 13A and 13B)A company anticipates a capital cost allowance (CCA)deduction of $30,000 in year 3 of a project.The company's tax rate is 30%,and its discount rate is 12%.What is the approximate present value of the CCA tax shield resulting from this deduction? (Do not round your intermediate calculations and round the final answer to the nearest whole dollar. )

Accepted Answer

A)  $6,406. 
B)  $9,000. 
C)  $14,947. 
D)  $21,000. 
A)  $6,406. 
B)  $9,000. 
C)  $14,947. 
D)  $21,000.

Question 17

(Appendix 13A)The net present value of this investment is closest to which of the following? (Do not round your intermediate calculations. )

Accepted Answer

A)  $1,119. 
B)  $6,550. 
C)  $13,450. 
D)  $20,000. 
A)  $1,119. 
B)  $6,550. 
C)  $13,450. 
D)  $20,000.

Question 18

When the net present value method is used,the internal rate of return is the discount rate used to compute the net present value of a project.

Accepted Answer

A) True 
 B)False

Question 19

(Appendix 13A)The following data are available on a proposed investment project:  
Which of the following statements best describes the internal rate of return on the proposed investment project? (Ignore income taxes in this problem. )

Accepted Answer

A)  It is between 11% and 12%. 
B)  It is between 12% and 13%. 
C)  It is between 13% and 14%. 
D)  It is less than the required rate of return. 
A)  It is between 11% and 12%. 
B)  It is between 12% and 13%. 
C)  It is between 13% and 14%. 
D)  It is less than the required rate of return.

Question 20

(Appendix 13A)The present value concept considers both recovery of the original investment and return on the original investment.

Accepted Answer

A) True 
 B)False

What is the incremental cash outlay now for the purchase of the new van?

(Appendix 13B)Last year,the sales at Jersey Company were $200,000 and were all cash sales.The tax-deductible expenses at Jersey were $125,000 and were all cash expenses.The tax rate was 30%.What was the after-tax net cash inflow at Jersey last year from these operations?

(Appendix 13A and 13B)The present value of the total after-tax net cash inflows (outflows),excluding any CCA tax shield,in Year 4 is closest to which of the following? (Do not round your intermediate. )

(Appendix 13B)Suppose a machine costs $20,000 now,has an expected life of eight years,and will require a $7,000 overhaul at the end of the third year.If the tax rate is 40%,what would be the after-tax cost of this overhaul?

(Appendix 13B)A company had tax-deductible cash expenses of $650,000 last year,and the tax rate was 30%.What was the after-tax net cash outflow for these expenses?

(Appendix 13B)Suppose a machine that costs $80,000 has a useful life of ten years.Also suppose that capital cost allowance (CCA)deduction on the machine is $8,000 in year 4.The tax rate is 40%.What would be the tax savings from the CCA tax shield in year 4?

The payback period would be closest to which of the following?

(Appendix 13A)An increase in the discount rate will result in an increase in the present value of a given cash flow.

(Appendix 13A)The Baker Company purchased a piece of equipment with the following expected results: What was the initial cost of the equipment? (Ignore income taxes in this problem. )(Round your PV factor to 5 decimal places and final answer to nearest whole dollar amount. )

(Appendix 13B)Last year,a firm had taxable cash receipts of $800,000,and the tax rate was 30%.What was the after-tax net cash inflow from these receipts?

When using the internal rate of return method to evaluate investment projects,if the internal rate of return is less than the required rate of return,the project should be accepted.

(Appendix 13A)The net present value of this investment is closest to which of the following? (Do not round your intermediate calculations. )

When the net present value method is used,the internal rate of return is the discount rate used to compute the net present value of a project.

(Appendix 13A)The following data are available on a proposed investment project: Which of the following statements best describes the internal rate of return on the proposed investment project? (Ignore income taxes in this problem. )

(Appendix 13A)The present value concept considers both recovery of the original investment and return on the original investment.

Managerial Accounting and the Business Environment

Cost Terms, Concepts, and Classifications

Cost Behaviour: Analysis and Use

Cost-Volume-Profit Relationships

Systems Design: Job-Order Costing

Systems Design: Process Costing

Activity-Based Costing: a Tool to Aid Decision Making

Variable Costing: a Tool for Management

Budgeting

Standard Costs and Overhead Analysis

Reporting for Control

Relevant Costs for Decision Making

Financial Statement Analysis Online

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Exam 13: Capital Budgeting Decisions

What is the incremental cash outlay now for the purchase of the new van?

(Appendix 13B)Last year,the sales at Jersey Company were $200,000 and were all cash sales.The tax-deductible expenses at Jersey were $125,000 and were all cash expenses.The tax rate was 30%.What was the after-tax net cash inflow at Jersey last year from these operations?

(Appendix 13A and 13B)The present value of the total after-tax net cash inflows (outflows),excluding any CCA tax shield,in Year 4 is closest to which of the following? (Do not round your intermediate. )

(Appendix 13B)Suppose a machine costs $20,000 now,has an expected life of eight years,and will require a $7,000 overhaul at the end of the third year.If the tax rate is 40%,what would be the after-tax cost of this overhaul?

(Appendix 13B)A company had tax-deductible cash expenses of $650,000 last year,and the tax rate was 30%.What was the after-tax net cash outflow for these expenses?

(Appendix 13B)Suppose a machine that costs $80,000 has a useful life of ten years.Also suppose that capital cost allowance (CCA)deduction on the machine is $8,000 in year 4.The tax rate is 40%.What would be the tax savings from the CCA tax shield in year 4?

The payback period would be closest to which of the following?

(Appendix 13A)An increase in the discount rate will result in an increase in the present value of a given cash flow.

(Appendix 13A)The Baker Company purchased a piece of equipment with the following expected results: What was the initial cost of the equipment? (Ignore income taxes in this problem. )(Round your PV factor to 5 decimal places and final answer to nearest whole dollar amount. )

(Appendix 13B)Last year,a firm had taxable cash receipts of $800,000,and the tax rate was 30%.What was the after-tax net cash inflow from these receipts?

When using the internal rate of return method to evaluate investment projects,if the internal rate of return is less than the required rate of return,the project should be accepted.

(Appendix 13A)The net present value of this investment is closest to which of the following? (Do not round your intermediate calculations. )

When the net present value method is used,the internal rate of return is the discount rate used to compute the net present value of a project.

(Appendix 13A)The following data are available on a proposed investment project: Which of the following statements best describes the internal rate of return on the proposed investment project? (Ignore income taxes in this problem. )

(Appendix 13A)The present value concept considers both recovery of the original investment and return on the original investment.

Managerial Accounting and the Business Environment

Cost Terms, Concepts, and Classifications

Cost Behaviour: Analysis and Use

Cost-Volume-Profit Relationships

Systems Design: Job-Order Costing

Systems Design: Process Costing

Activity-Based Costing: a Tool to Aid Decision Making

Variable Costing: a Tool for Management

Budgeting

Standard Costs and Overhead Analysis

Reporting for Control

Relevant Costs for Decision Making

Financial Statement Analysis Online

Filters