Question 1

The payback period provides information to managers that can be used to help

Accepted Answer

A)  control the risks associated with the uncertainty of future cash flows. 
B)  minimize the impact of an investment on a firm's liquidity problems. 
C)  control the risk of obsolescence. 
D)  control the effect of the investment on performance measures. 
E)  All of these. 
A)  control the risks associated with the uncertainty of future cash flows. 
B)  minimize the impact of an investment on a firm's liquidity problems. 
C)  control the risk of obsolescence. 
D)  control the effect of the investment on performance measures. 
E)  All of these.

Question 2

A division manager is considering a project that requires a significant initial investment.The company's top management will not approve any project that does not return at least 12%.The manager will most likely use which of the following capital investment models?

Accepted Answer

A)  payback period 
B)  accounting rate of return 
C)  net present value 
D)  internal rate of return 
E)  None of these. 
A)  payback period 
B)  accounting rate of return 
C)  net present value 
D)  internal rate of return 
E)  None of these.

Question 3

Sony Lavery is considering investing $45,000 in a project with the following cash revenues and expenses: ?
?
 
- What is the average income for the project?

Accepted Answer

A)  $19,250 
B)  $30,000 
C)  $20,000 
D)  $14,500 
E)  $18,000 
A)  $19,250 
B)  $30,000 
C)  $20,000 
D)  $14,500 
E)  $18,000

Question 4

In general, it is best if postaudits are done by company management, since they understand the actual operating conditions.

Accepted Answer

A) True 
 B)False

Question 5

The process of planning, setting goals and priorities, arranging financing, and using certain criteria to select long-term assets is called capital investment decisions.

Accepted Answer

A) True 
 B)False

Question 6

Postaudits supply feedback to managers that should help improve future decision making.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is true regarding the measurement and use of indirect and intangible benefits in capital investment decision making?

Accepted Answer

A)  ABC has made identifying indirect benefits easier. 
B)  Intangible benefits cannot be measured. 
C)  Indirect and intangible benefits should not be considered, only direct costs and benefits are considered. 
D)  Actions by competitors are not considered. 
E)  None of these. 
A)  ABC has made identifying indirect benefits easier. 
B)  Intangible benefits cannot be measured. 
C)  Indirect and intangible benefits should not be considered, only direct costs and benefits are considered. 
D)  Actions by competitors are not considered. 
E)  None of these.

Question 8

The disadvantage of a payback period is that it:

Accepted Answer

A)  ignores the project's total profitability. 
B)  considers the time value of money. 
C)  considers total profitability, requiring the forecasting of all future cash flows. 
D)  uses an internal rate of return to calculate profitability. 
E)  uses operating income rather than cash flows. 
A)  ignores the project's total profitability. 
B)  considers the time value of money. 
C)  considers total profitability, requiring the forecasting of all future cash flows. 
D)  uses an internal rate of return to calculate profitability. 
E)  uses operating income rather than cash flows.

Question 9

One drawback to the internal rate of return model is that cash inflows must occur evenly over the life of the investment.

Accepted Answer

A) True 
 B)False

Question 10

The major disadvantage of a postaudit is that it is ____________.

Accepted Answer

The answer of The major disadvantage of a postaudit is...

Question 11

_______________________ ignore the time value of money.

Accepted Answer

Nondiscoun

Question 12

Which of the following formulas is used to compute the accounting rate of return?

Accepted Answer

A)  Average Income / Initial Investment 
B)  Initial Investment / Annual Cash Flow 
C)  Net Profit / Initial Cash Flow 
D)  Present Value of the Investment / Average Income 
E)  (Average Income + Initial Investment) / Initial Investment 
A)  Average Income / Initial Investment 
B)  Initial Investment / Annual Cash Flow 
C)  Net Profit / Initial Cash Flow 
D)  Present Value of the Investment / Average Income 
E)  (Average Income + Initial Investment) / Initial Investment

Question 13

The following information pertains to an investment: 
 The present value of the annual cash flow (rounded) is

Accepted Answer

A)  $136,822. 
B)  $152,538. 
C)  $204,884. 
D)  $218,592. 
A)  $136,822. 
B)  $152,538. 
C)  $204,884. 
D)  $218,592.

Question 14

The difference between the present value of the cash inflows and outflows associated with a project is the internal rate of return model.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following is not a benefit of postaudits of capital investments?

Accepted Answer

A)  Considers changes in the actual operating environment. 
B)  Guides managers to make capital investment in the best interests of the firm. 
C)  Ensures that resources are used wisely by evaluating profitability. 
D)  Supplies feedback to managers that should help improve decision making. 
E)  All of these are benefits. 
A)  Considers changes in the actual operating environment. 
B)  Guides managers to make capital investment in the best interests of the firm. 
C)  Ensures that resources are used wisely by evaluating profitability. 
D)  Supplies feedback to managers that should help improve decision making. 
E)  All of these are benefits.

Question 16

Only accounting rate of return ignores the time value of money.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following defines internal rate of return (IRR)?

Accepted Answer

A)  IRR is the total variable cost incurred in a project. 
B)  IRR is the maximum return achievable on investments. 
C)  IRR is the difference between the present value of the cash inflows and outflows associated with a project. 
D)  IRR is the interest rate that sets the present value of a project's cash inflows equal to the present value of a project's cost. 
A)  IRR is the total variable cost incurred in a project. 
B)  IRR is the maximum return achievable on investments. 
C)  IRR is the difference between the present value of the cash inflows and outflows associated with a project. 
D)  IRR is the interest rate that sets the present value of a project's cash inflows equal to the present value of a project's cost.

Question 18

______________________ are projects that, if accepted or rejected, do not affect the cash flows of other projects.

Accepted Answer

Independen

Question 19

Before-tax cash flows must be forecasted and used in capital investment decision making.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following is true while making a capital investment decision?

Accepted Answer

A)  A manager should assess the risk of the project. 
B)  A manager should ignore the timing of the cash flows. 
C)  A manager should compute the competitor's return on investment. 
D)  A manager should ensure that the project cost is equal to the cash flow from investment. 
E)  All of these. 
A)  A manager should assess the risk of the project. 
B)  A manager should ignore the timing of the cash flows. 
C)  A manager should compute the competitor's return on investment. 
D)  A manager should ensure that the project cost is equal to the cash flow from investment. 
E)  All of these.

The payback period provides information to managers that can be used to help

A division manager is considering a project that requires a significant initial investment.The company's top management will not approve any project that does not return at least 12%.The manager will most likely use which of the following capital investment models?

Sony Lavery is considering investing $45,000 in a project with the following cash revenues and expenses: ? ? - What is the average income for the project?

In general, it is best if postaudits are done by company management, since they understand the actual operating conditions.

The process of planning, setting goals and priorities, arranging financing, and using certain criteria to select long-term assets is called capital investment decisions.

Postaudits supply feedback to managers that should help improve future decision making.

Which of the following is true regarding the measurement and use of indirect and intangible benefits in capital investment decision making?

The disadvantage of a payback period is that it:

One drawback to the internal rate of return model is that cash inflows must occur evenly over the life of the investment.

The major disadvantage of a postaudit is that it is ____________.

_______________________ ignore the time value of money.

Which of the following formulas is used to compute the accounting rate of return?

The following information pertains to an investment: The present value of the annual cash flow (rounded) is

The difference between the present value of the cash inflows and outflows associated with a project is the internal rate of return model.

Which of the following is not a benefit of postaudits of capital investments?

Only accounting rate of return ignores the time value of money.

Which of the following defines internal rate of return (IRR)?

______________________ are projects that, if accepted or rejected, do not affect the cash flows of other projects.

Before-tax cash flows must be forecasted and used in capital investment decision making.

Which of the following is true while making a capital investment decision?

Introduction to Managerial Accounting

Basic Managerial Accounting Concepts

Cost Behavior, Cost Forecasting, and Segmented Income Statements

Job-Order Costing and Normal Cost Overhead Application

Activity-Based Costing and Management

Process Costing

Cost-Volume-Profit Analysis

Tactical Decision-Making and Relevant Costing

Profit Planning and Flexible Budgets

Standard Costing and Variance Analysis

Performance Evaluation and Decentralization

Emerging Topics in Managerial Accounting: Sustainability, Quality Cost, Lean Accounting, International Issues, Enterprise Risk Management, the Managerial Accountant in Forensicfraud Accounting

Statement of Cash Flows

Financial Statement Analysis

Filters

Exam 12: Capital Investment Decisions

The payback period provides information to managers that can be used to help

A division manager is considering a project that requires a significant initial investment.The company's top management will not approve any project that does not return at least 12%.The manager will most likely use which of the following capital investment models?

Sony Lavery is considering investing $45,000 in a project with the following cash revenues and expenses: ? ? - What is the average income for the project?

In general, it is best if postaudits are done by company management, since they understand the actual operating conditions.

The process of planning, setting goals and priorities, arranging financing, and using certain criteria to select long-term assets is called capital investment decisions.

Postaudits supply feedback to managers that should help improve future decision making.

Which of the following is true regarding the measurement and use of indirect and intangible benefits in capital investment decision making?

The disadvantage of a payback period is that it:

One drawback to the internal rate of return model is that cash inflows must occur evenly over the life of the investment.

The major disadvantage of a postaudit is that it is ____________.

_______________________ ignore the time value of money.

Which of the following formulas is used to compute the accounting rate of return?

The following information pertains to an investment: The present value of the annual cash flow (rounded) is

The difference between the present value of the cash inflows and outflows associated with a project is the internal rate of return model.

Which of the following is not a benefit of postaudits of capital investments?

Only accounting rate of return ignores the time value of money.

Which of the following defines internal rate of return (IRR)?

______________________ are projects that, if accepted or rejected, do not affect the cash flows of other projects.

Before-tax cash flows must be forecasted and used in capital investment decision making.

Which of the following is true while making a capital investment decision?

Introduction to Managerial Accounting

Basic Managerial Accounting Concepts

Cost Behavior, Cost Forecasting, and Segmented Income Statements

Job-Order Costing and Normal Cost Overhead Application

Activity-Based Costing and Management

Process Costing

Cost-Volume-Profit Analysis

Tactical Decision-Making and Relevant Costing

Profit Planning and Flexible Budgets

Standard Costing and Variance Analysis

Performance Evaluation and Decentralization

Emerging Topics in Managerial Accounting: Sustainability, Quality Cost, Lean Accounting, International Issues, Enterprise Risk Management, the Managerial Accountant in Forensicfraud Accounting

Statement of Cash Flows

Financial Statement Analysis

Filters