Question 1

(Appendix 13B)What were the tax savings from the CCA tax shield for Year 1?

Accepted Answer

A)  $24,000. 
B)  $32,000. 
C)  $36,000. 
D)  $48,000. 
A)  $24,000. 
B)  $32,000. 
C)  $36,000. 
D)  $48,000.

Question 2

The simple rate of return would be closest to which of the following?

Accepted Answer

A)  12.50%. 
B)  17.50%. 
C)  18.75%. 
D)  30.00%. 
A)  12.50%. 
B)  17.50%. 
C)  18.75%. 
D)  30.00%.

Question 3

(Appendix 13B)When a company invests in equipment,it gets to immediately expense the cost of the equipment on the company's income tax return filed with Canada Customs and Revenue Agency (CCRA).

Accepted Answer

A) True 
 B)False

Question 4

(Appendix 13A)Bradley Company's required rate of return is 14%.The company has an opportunity to be the exclusive distributor of a very popular consumer item.No new equipment would be needed,but the company would have to use one-fourth of the space in a warehouse it owns.The warehouse cost $200,000 new.The warehouse is currently half-empty,and there are no other plans to use the empty space.In addition,the company would have to invest $100,000 in working capital to carry inventories and accounts receivable for the new product line.The company would have the distributorship for only five years.The distributorship would generate a $17,000 net annual cash inflow.(Ignore income taxes in this problem. )
Required:
What is the net present value of the project at a discount rate of 14%? Should the project be accepted?

Accepted Answer

@#IMG-DLM& 
NPV = $10,299.24.Calculated

Question 5

(Appendix 13A)Vernon Company has been offered a seven-year contract to supply a part for the military.After careful study,the company has estimated the following data relating to the contract:   
It is not expected that the contract would be extended beyond the initial contract period.The company's discount rate is 10%.(Ignore income taxes in this problem. )
Required:
Use the net present value method to determine if the contract should be accepted.Round all computations to the nearest dollar.

Accepted Answer

@#IMG-DLM& 
NPV = $19,013.Calculated usi

Question 6

(Appendix 13A and 13B)The present value of the after-tax cash from the sale of the equipment at the end of six years is closest to which of the following? (Do not round your intermediate calculations. )

Accepted Answer

A)  $0. 
B)  $3,645. 
C)  $5,467. 
D)  $9,112. 
A)  $0. 
B)  $3,645. 
C)  $5,467. 
D)  $9,112.

Question 7

What does the payback method measure?

Accepted Answer

A)  How quickly investment dollars may be recovered. 
B)  The cash flow from an investment. 
C)  The economic life of an investment. 
D)  The profitability of an investment. 
A)  How quickly investment dollars may be recovered. 
B)  The cash flow from an investment. 
C)  The economic life of an investment. 
D)  The profitability of an investment.

Question 8

(Appendix 13B)The Regulations that accompany the Canadian Income Tax Act require that capital cost allowance (CCA)be calculated generally on a declining balance of each single depreciable asset.

Accepted Answer

A) True 
 B)False

Question 9

What is the total annual cash inflow from this machine for capital budgeting purposes?

Accepted Answer

A)  $3,650. 
B)  $4,750. 
C)  $5,000. 
D)  $5,150. 
A)  $3,650. 
B)  $4,750. 
C)  $5,000. 
D)  $5,150.

Question 10

(Appendix 13A)What would the annual net cash inflows from this project have to be in order to justify investing in remodelling? (Do not round your intermediate calculations and round your final answer to the nearest whole number. )

Accepted Answer

A)  $14,495. 
B)  $16,147. 
C)  $29,159. 
D)  $35,842. 
A)  $14,495. 
B)  $16,147. 
C)  $29,159. 
D)  $35,842.

Question 11

(Appendix 13B)If a company is operating at a profit,all cash inflows associated with an investment project should be multiplied by one minus the tax rate to be placed on an after-tax basis.

Accepted Answer

A) True 
 B)False

Question 12

(Appendix 13A)Joe Flubup is the president of Flubup,Inc.He is considering buying a new machine that would cost $25,470.Joe has determined that the new machine promises an internal rate of return of 14%,but Joe has misplaced the paper which tells the annual cost savings promised by the new machine.He does remember that the machine has a projected life of 12 years.Based on these data,what are the annual cost savings to the nearest dollar? (Ignore income taxes in this problem. )

Accepted Answer

A)  Impossible to determine from the data given. 
B)  $2,122.50. 
C)  $4,500.00. 
D)  $4,650.00. 
A)  Impossible to determine from the data given. 
B)  $2,122.50. 
C)  $4,500.00. 
D)  $4,650.00.

Question 13

Jarvey Company is studying a project that would have a ten-year life and would require a $450,000 investment in equipment that has no salvage value.The project would provide net income each year as follows for the life of the project:  
The company's required rate of return is 12%.What is the payback period for this project? (Ignore income taxes in this problem. )

Accepted Answer

A)  2.00 years. 
B)  3.00 years. 
C)  4.28 years. 
D)  9.00 years. 
A)  2.00 years. 
B)  3.00 years. 
C)  4.28 years. 
D)  9.00 years.

Question 14

(Appendix 13A)What is the net present value of the alternative of purchasing the new system? (Do not round your intermediate calculations and round your final answer to the nearest whole number. )

Accepted Answer

A)  ($1,236,495). 
B)  ($1,169,963). 
C)  ($1,076,662). 
D)  ($969,895). 
A)  ($1,236,495). 
B)  ($1,169,963). 
C)  ($1,076,662). 
D)  ($969,895).

Question 15

If the net present value of a project is zero,based on a discount rate of 16%,which of the following statements about the project's internal rate of return is correct?

Accepted Answer

A)  It is equal to 16%. 
B)  It is less than 16%. 
C)  It is greater than 16%. 
D)  It cannot be determined from the information given. 
A)  It is equal to 16%. 
B)  It is less than 16%. 
C)  It is greater than 16%. 
D)  It cannot be determined from the information given.

Question 16

Ferris Company has an old machine that is fully depreciated but has a current salvage value of $5,000.The company wants to purchase a new machine that would cost $60,000 and have a five-year useful life and zero salvage value.Expected changes in annual revenues and expenses if the new machine is purchased are:   
(Ignore income taxes in this problem. )
Required:
a)What is the payback period on the new equipment?
b)What is the simple rate of return on the new equipment?

Accepted Answer

a)Investment required/Net annual cash in

Question 17

(Appendix 13B)A piece of equipment is in Class 7 with a maximum CCA rate of 15%.The income tax rate is 40%.The tax savings from the CCA tax shield on this equipment for the first year was $1,500.What must have been the original capital cost of the equipment?

Accepted Answer

A)  $3,750. 
B)  $25,000. 
C)  $33,333. 
D)  $50,000. 
A)  $3,750. 
B)  $25,000. 
C)  $33,333. 
D)  $50,000.

Question 18

(Appendix 13A)The following data pertain to an investment proposal:  
The internal rate of return on this investment proposal is closest to which of the following? (Ignore income taxes in this problem. )

Accepted Answer

A)  6.7%. 
B)  7.3%. 
C)  8.7%. 
D)  9.3%. 
A)  6.7%. 
B)  7.3%. 
C)  8.7%. 
D)  9.3%.

Question 19

(Appendix 13A)Kipling Company has invested in a project that has an eight-year life.It is expected that the annual cash inflow from the project will be $20,000.Assuming that the project has an internal rate of return of 12%,how much was the initial investment in the 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)  $64,648. 
B)  $80,800. 
C)  $99,353. 
D)  $160,000. 
A)  $64,648. 
B)  $80,800. 
C)  $99,353. 
D)  $160,000.

Question 20

How are the following items used in the calculation of the net present value of a proposed project? (Ignore income tax considerations. )

Accepted Answer

A)  Option A 
B)  Option B 
C)  Option C 
D)  Option D 
A)  Option A 
B)  Option B 
C)  Option C 
D)  Option D

(Appendix 13B)What were the tax savings from the CCA tax shield for Year 1?

The simple rate of return would be closest to which of the following?

(Appendix 13B)When a company invests in equipment,it gets to immediately expense the cost of the equipment on the company's income tax return filed with Canada Customs and Revenue Agency (CCRA).

(Appendix 13A and 13B)The present value of the after-tax cash from the sale of the equipment at the end of six years is closest to which of the following? (Do not round your intermediate calculations. )

What does the payback method measure?

(Appendix 13B)The Regulations that accompany the Canadian Income Tax Act require that capital cost allowance (CCA)be calculated generally on a declining balance of each single depreciable asset.

What is the total annual cash inflow from this machine for capital budgeting purposes?

(Appendix 13A)What would the annual net cash inflows from this project have to be in order to justify investing in remodelling? (Do not round your intermediate calculations and round your final answer to the nearest whole number. )

(Appendix 13B)If a company is operating at a profit,all cash inflows associated with an investment project should be multiplied by one minus the tax rate to be placed on an after-tax basis.

(Appendix 13A)What is the net present value of the alternative of purchasing the new system? (Do not round your intermediate calculations and round your final answer to the nearest whole number. )

If the net present value of a project is zero,based on a discount rate of 16%,which of the following statements about the project's internal rate of return is correct?

(Appendix 13B)A piece of equipment is in Class 7 with a maximum CCA rate of 15%.The income tax rate is 40%.The tax savings from the CCA tax shield on this equipment for the first year was $1,500.What must have been the original capital cost of the equipment?

(Appendix 13A)The following data pertain to an investment proposal: The internal rate of return on this investment proposal is closest to which of the following? (Ignore income taxes in this problem. )

How are the following items used in the calculation of the net present value of a proposed project? (Ignore income tax considerations. )

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

Exam 13: Capital Budgeting Decisions

(Appendix 13B)What were the tax savings from the CCA tax shield for Year 1?

The simple rate of return would be closest to which of the following?

(Appendix 13B)When a company invests in equipment,it gets to immediately expense the cost of the equipment on the company's income tax return filed with Canada Customs and Revenue Agency (CCRA).

(Appendix 13A and 13B)The present value of the after-tax cash from the sale of the equipment at the end of six years is closest to which of the following? (Do not round your intermediate calculations. )

What does the payback method measure?

(Appendix 13B)The Regulations that accompany the Canadian Income Tax Act require that capital cost allowance (CCA)be calculated generally on a declining balance of each single depreciable asset.

What is the total annual cash inflow from this machine for capital budgeting purposes?

(Appendix 13A)What would the annual net cash inflows from this project have to be in order to justify investing in remodelling? (Do not round your intermediate calculations and round your final answer to the nearest whole number. )

(Appendix 13B)If a company is operating at a profit,all cash inflows associated with an investment project should be multiplied by one minus the tax rate to be placed on an after-tax basis.

(Appendix 13A)What is the net present value of the alternative of purchasing the new system? (Do not round your intermediate calculations and round your final answer to the nearest whole number. )

If the net present value of a project is zero,based on a discount rate of 16%,which of the following statements about the project's internal rate of return is correct?

(Appendix 13B)A piece of equipment is in Class 7 with a maximum CCA rate of 15%.The income tax rate is 40%.The tax savings from the CCA tax shield on this equipment for the first year was $1,500.What must have been the original capital cost of the equipment?

(Appendix 13A)The following data pertain to an investment proposal: The internal rate of return on this investment proposal is closest to which of the following? (Ignore income taxes in this problem. )

How are the following items used in the calculation of the net present value of a proposed project? (Ignore income tax considerations. )

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