Question 1

A comparison of year-to-year changes in customer net present value estimates

Accepted Answer

A) is one way to be certain of the customer evaluation process. 
B) highlights whether managers have been successful in maintaining long-run profitable relationships with their customers. 
C) can be used to motivate customers. 
D) is difficult to calculate because of the need to know the customers' cost of capital. 
E) can be used in place of the payback method. 
A) is one way to be certain of the customer evaluation process. 
B) highlights whether managers have been successful in maintaining long-run profitable relationships with their customers. 
C) can be used to motivate customers. 
D) is difficult to calculate because of the need to know the customers' cost of capital. 
E) can be used in place of the payback method.

Question 2

Which of the following statements about the net present value method is TRUE?

Accepted Answer

A) Projects with higher net present values are preferred when all other factors are equal. 
B) Projects with negative NPV are acceptable,if no positive NPV projects are available. 
C) It focuses on operating income. 
D) The origination of cash flows is not important in the analysis. 
E) Acceptable projects are those with the highest discount rate. 
A) Projects with higher net present values are preferred when all other factors are equal. 
B) Projects with negative NPV are acceptable,if no positive NPV projects are available. 
C) It focuses on operating income. 
D) The origination of cash flows is not important in the analysis. 
E) Acceptable projects are those with the highest discount rate.

Question 3

Use the information below to answer the following question(s).
Albernie Ltd.purchased a CCA Class 8 (CCA rate of 20%)item of equipment for $90,000.The equipment was the only item in the Class 8 capital cost allowance pool.The equipment is expected to generate savings in the amount of $40,000 per year.The company uses straight-line depreciation,estimates a 3 year useful life with $20,000 salvage value for the new equipment.The tax rate is 35%,and Albernie has a required rate of return of 9.0%.
-What is the maximum capital cost allowance that Albernie Ltd.can claim in year 2,if the maximum was claimed in year 1?

Accepted Answer

A) $11,200 
B) $12,600 
C) $18,000 
D) $16,200 
E) $14,400 
A) $11,200 
B) $12,600 
C) $18,000 
D) $16,200 
E) $14,400

Question 4

Accrual accounting measures income on a year-to-year basis.

Accepted Answer

A) True 
 B)False

Question 5

The first step in the capital budgeting decision process model is to

Accepted Answer

A) Establish assumptions common for each potential capital investment. 
B) Obtain appropriate sources of financing for investments. 
C) Identify potential capital investments that agree with the organization's strategy. 
D) Manage the control of non-quantitative factors. 
E) Analyze the present value of future cash inflow and outflow and relevant qualitative factors. 
A) Establish assumptions common for each potential capital investment. 
B) Obtain appropriate sources of financing for investments. 
C) Identify potential capital investments that agree with the organization's strategy. 
D) Manage the control of non-quantitative factors. 
E) Analyze the present value of future cash inflow and outflow and relevant qualitative factors.

Question 6

The net present value method is a discounted cash flow method that concentrates on cash accruals.

Accepted Answer

A) True 
 B)False

Question 7

A capital budgeting project will have a positive net present value if its return is less than the hurdle rate.

Accepted Answer

A) True 
 B)False

Question 8

In selecting capital projects,organizations choose

Accepted Answer

A) the alternative that matches the RRR. 
B) the alternative that has revenues that exceed its costs. 
C) the alternative that has the highest revenues. 
D) the alternative that has the longest time horizon,but also exceeds the RRR. 
E) the alternative that provides benefits that exceed predicted costs by the greatest amount. 
A) the alternative that matches the RRR. 
B) the alternative that has revenues that exceed its costs. 
C) the alternative that has the highest revenues. 
D) the alternative that has the longest time horizon,but also exceeds the RRR. 
E) the alternative that provides benefits that exceed predicted costs by the greatest amount.

Question 9

Advantages from using the payback method when capital budgeting include

Accepted Answer

A) is useful when future cash flows in later years are uncertain. 
B) promotes long-term projects. 
C) neglects the time value of money. 
D) emphasizes short-term projects. 
E) considers only cash flows during the payback period. 
A) is useful when future cash flows in later years are uncertain. 
B) promotes long-term projects. 
C) neglects the time value of money. 
D) emphasizes short-term projects. 
E) considers only cash flows during the payback period.

Question 10

Fisher Ltd.is considering the purchase of new equipment.Details of the investment follow:
   
Required:
a.Calculate the payback period.
b.Calculate the accrual accounting rate of return based on the initial investment.
c.Calculate the net present value.

Accepted Answer

a.
Annual cash flows = $520,000 - $295,0

Question 11

If the internal rate of return is less than the hurdle rate,the net present value of the project will be negative.

Accepted Answer

A) True 
 B)False

Question 12

Businesses may opt not to claim the full amount of available capital cost allowance.

Accepted Answer

A) True 
 B)False

Question 13

Relevant cash flows are expected future cash flows that differ among the alternative uses of investment funds.

Accepted Answer

A) True 
 B)False

Question 14

Capital budgeting emphasizes the role of financial information in investment decisions.

Accepted Answer

A) True 
 B)False

Question 15

The primary advantage of the internal rate of return method is that the end result of the computation is in dollars instead of percentages.

Accepted Answer

A) True 
 B)False

Question 16

The difference between the yield on local government bonds and the yield on corresponding domestic government treasury bonds is known as

Accepted Answer

A) sovereign spread. 
B) the foreign discount rate. 
C) interest expense. 
D) the risk free rate. 
E) interest rate risk. 
A) sovereign spread. 
B) the foreign discount rate. 
C) interest expense. 
D) the risk free rate. 
E) interest rate risk.

Question 17

The disposal of a machine (or any depreciable asset)results in a lost tax shield.

Accepted Answer

A) True 
 B)False

Question 18

A rental company replaces its heavy drilling machine every four years (no salvage value).It is contemplating acquiring a larger machine,at a cost of $70,000,which is guaranteed to last for seven years.The current machine can be traded-in for a $3,000 down payment on the new machine,and the company expects annual savings in operating costs of $15,000.What is the AARR for the new machine?

Accepted Answer

A) 2.86% 
B) 6.85% 
C) 7.14% 
D) 20.55% 
E) 21.43% 
A) 2.86% 
B) 6.85% 
C) 7.14% 
D) 20.55% 
E) 21.43%

Question 19

Explain capital budgeting,and list each of the five steps of the capital budgeting decision process model.Include both phases for step five.

Accepted Answer

Capital budgeting is long-run planning f

Question 20

The half-year rule assumes that all net additions are purchased in the middle of the year,and thus only one-half of the stated CCA rate is allowed in the first year.

Accepted Answer

A) True 
 B)False

A comparison of year-to-year changes in customer net present value estimates

Which of the following statements about the net present value method is TRUE?

Accrual accounting measures income on a year-to-year basis.

The first step in the capital budgeting decision process model is to

The net present value method is a discounted cash flow method that concentrates on cash accruals.

A capital budgeting project will have a positive net present value if its return is less than the hurdle rate.

In selecting capital projects,organizations choose

Advantages from using the payback method when capital budgeting include

Fisher Ltd.is considering the purchase of new equipment.Details of the investment follow: Required: a.Calculate the payback period. b.Calculate the accrual accounting rate of return based on the initial investment. c.Calculate the net present value.

If the internal rate of return is less than the hurdle rate,the net present value of the project will be negative.

Businesses may opt not to claim the full amount of available capital cost allowance.

Relevant cash flows are expected future cash flows that differ among the alternative uses of investment funds.

Capital budgeting emphasizes the role of financial information in investment decisions.

The primary advantage of the internal rate of return method is that the end result of the computation is in dollars instead of percentages.

The difference between the yield on local government bonds and the yield on corresponding domestic government treasury bonds is known as

The disposal of a machine (or any depreciable asset)results in a lost tax shield.

Explain capital budgeting,and list each of the five steps of the capital budgeting decision process model.Include both phases for step five.

The half-year rule assumes that all net additions are purchased in the middle of the year,and thus only one-half of the stated CCA rate is allowed in the first year.

The Accountants Vital Role in Decision Making

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Management

Master Budget and Responsibility Accounting

Flexible Budgets,variances,and Management Control: I

Flexible Budgets,variances,and Management Control: II

Income Effects of Denominator Level on Inventory Valuation

Analysis of Cost Behaviour

Decision Making and Relevant Information

Pricing Decisions, product Profitability Decisions, and Cost Management

Strategy,balanced Scorecard,and Profitability Analysis

Period Cost Allocation

Cost Allocation: Joint Products and Byproducts

Revenue and Customer Profitability Analysis

Process Costing

Spoilage, rework, and Scrap

Inventory Cost Management Strategies

Transfer Pricing and Multinational Management Control Systems

Multinational Performance Measurement and Compensation

Filters

Exam 20: Capital Budgeting: Methods of Investment Analysis

A comparison of year-to-year changes in customer net present value estimates

Which of the following statements about the net present value method is TRUE?

Accrual accounting measures income on a year-to-year basis.

The first step in the capital budgeting decision process model is to

The net present value method is a discounted cash flow method that concentrates on cash accruals.

A capital budgeting project will have a positive net present value if its return is less than the hurdle rate.

In selecting capital projects,organizations choose

Advantages from using the payback method when capital budgeting include

Fisher Ltd.is considering the purchase of new equipment.Details of the investment follow: Required: a.Calculate the payback period. b.Calculate the accrual accounting rate of return based on the initial investment. c.Calculate the net present value.

If the internal rate of return is less than the hurdle rate,the net present value of the project will be negative.

Businesses may opt not to claim the full amount of available capital cost allowance.

Relevant cash flows are expected future cash flows that differ among the alternative uses of investment funds.

Capital budgeting emphasizes the role of financial information in investment decisions.

The primary advantage of the internal rate of return method is that the end result of the computation is in dollars instead of percentages.

The difference between the yield on local government bonds and the yield on corresponding domestic government treasury bonds is known as

The disposal of a machine (or any depreciable asset)results in a lost tax shield.

Explain capital budgeting,and list each of the five steps of the capital budgeting decision process model.Include both phases for step five.

The half-year rule assumes that all net additions are purchased in the middle of the year,and thus only one-half of the stated CCA rate is allowed in the first year.

The Accountants Vital Role in Decision Making

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Management

Master Budget and Responsibility Accounting

Flexible Budgets,variances,and Management Control: I

Flexible Budgets,variances,and Management Control: II

Income Effects of Denominator Level on Inventory Valuation

Analysis of Cost Behaviour

Decision Making and Relevant Information

Pricing Decisions, product Profitability Decisions, and Cost Management

Strategy,balanced Scorecard,and Profitability Analysis

Period Cost Allocation

Cost Allocation: Joint Products and Byproducts

Revenue and Customer Profitability Analysis

Process Costing

Spoilage, rework, and Scrap

Inventory Cost Management Strategies

Transfer Pricing and Multinational Management Control Systems

Multinational Performance Measurement and Compensation

Filters