Question 1

The two types of capital budgeting projects are ________________ and _______________.

Accepted Answer

independent projects, mutually

Question 2

The internal rate of return is the most widely used of the capital investment techniques.

Accepted Answer

A) True 
 B)False

Question 3

Five mutually exclusive projects had the following information:  
Which project is preferred?

Accepted Answer

A)  Project V 
B)  Project W 
C)  Project X 
D)  Project Y 
A)  Project V 
B)  Project W 
C)  Project X 
D)  Project Y

Question 4

Companies that perform postaudits of capital projects experience a number of benefits.

Accepted Answer

A) True 
 B)False

Question 5

When comparing the payback method and the accounting rate of return methods, which of the following is true?

Accepted Answer

A)  i 
B)  ii 
C)  iii 
D)  iv 
A)  i 
B)  ii 
C)  iii 
D)  iv

Question 6

The minimum acceptable rate of return for a project is the required rate of return.

Accepted Answer

A) True 
 B)False

Question 7

Aqua Shop is considering the purchase of a used printing press costing $15,000.The printing press would generate a net cash inflow of $6,000 per year for four years.At the end of four years, the press would have no salvage value.The company's cost of capital is 12%.The company uses straight-line depreciation with no mid-year convention. 
What is the accounting rate of return on the original investment in the press to the nearest percent, assuming no taxes are paid?

Accepted Answer

A)  20 % 
B)  15% 
C)  41% 
D)  9% 
A)  20 % 
B)  15% 
C)  41% 
D)  9%

Question 8

Net present value analysis and internal rate of return analysis can sometimes produce erroneous choices because they ignore the time value of money.

Accepted Answer

A) True 
 B)False

Question 9

The process of making capital investment decisions often is referred to as ________________.

Accepted Answer

The answer of The process of making capital investment decisions...

Question 10

Kenner Company is considering two projects.  
 
  Present value of an Annuity of $1 in Arrears

- Which of the two projects, A or B, is better in terms of internal rate of return?

Accepted Answer

A)  project A with an IRR of 12% 
B)  project B with an IRR of 14% 
C)  project A with an IRR of 10% 
D)  project B with an IRR of 10% 
E)  both projects have the same IRR 
A)  project A with an IRR of 12% 
B)  project B with an IRR of 14% 
C)  project A with an IRR of 10% 
D)  project B with an IRR of 10% 
E)  both projects have the same IRR

Question 11

The two major categories of capital investment decision models are independent and mutually exclusive.

Accepted Answer

A) True 
 B)False

Question 12

Two discounting models for capital investment decision making are net present value and internal rate of return.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is preferred by managers when the risk of obsolescence is high?

Accepted Answer

A)  A short payback period 
B)  A high opportunity cost 
C)  A low accounting rate of return 
D)  All of these 
E)  None of these 
A)  A short payback period 
B)  A high opportunity cost 
C)  A low accounting rate of return 
D)  All of these 
E)  None of these

Question 14

Sony Lavery is considering investing $45,000 in a project with the following cash revenues and expenses:

-What is the accounting rate of return for the project?

Accepted Answer

A)  32% 
B)  41% 
C)  20% 
D)  26% 
E)  35% 
A)  32% 
B)  41% 
C)  20% 
D)  26% 
E)  35%

Question 15

In practice, managers often choose a discount rate that is higher than the cost of capital.

Accepted Answer

A) True 
 B)False

Question 16

Match each item with the correct statement below.
-comparison of actual benefits and costs of a project with the expected benefits and costs

Accepted Answer

A) Payback period 
B) Accounting rate of return 
C) Net present value 
D) Internal rate of return 
E) Discount rate
F)Annuity
G)Post-audit
H)Compounding of interest 
A) Payback period 
B) Accounting rate of return 
C) Net present value 
D) Internal rate of return 
E) Discount rate
F)Annuity
G)Post-audit
H)Compounding of interest

Question 17

A firm is considering a project requiring an investment of $40,000.The project would generate an annual cash flow of $10,858 for the next six years.The company uses the straight-line method of depreciation.Which of the following is the approximate internal rate of return for the project? (Note: Round the discount factor to three decimal places.)

Accepted Answer

A)  11% 
B)  18% 
C)  12%. 
D)  16% 
A)  11% 
B)  18% 
C)  12%. 
D)  16%

Question 18

Davis Company is considering the purchase of a new piece of equipment that will cost $1,600,000 and have a life of five years with no expected salvage value.The expected cash flows associated with the project are as follows:  
 
-  What is the accounting rate of return for the project?

Accepted Answer

A)  83.33% 
B)  31.25% 
C)  47.00% 
D)  37.50% 
E)  43.75% 
A)  83.33% 
B)  31.25% 
C)  47.00% 
D)  37.50% 
E)  43.75%

Question 19

A company is considering two projects. 
 
  What is the payback period for Project II?

Accepted Answer

A)  1 year 
B)  2.5 years 
C)  4.3 years 
D)  3 years 
E)  5 years 
A)  1 year 
B)  2.5 years 
C)  4.3 years 
D)  3 years 
E)  5 years

Question 20

The _______________________ is defined as the interest rate that sets the present value of a project's cash inflows equal to the present value of the project's cost.

Accepted Answer

internal r

The two types of capital budgeting projects are __ and _.

The internal rate of return is the most widely used of the capital investment techniques.

Five mutually exclusive projects had the following information: Which project is preferred?

Companies that perform postaudits of capital projects experience a number of benefits.

When comparing the payback method and the accounting rate of return methods, which of the following is true?

The minimum acceptable rate of return for a project is the required rate of return.

Net present value analysis and internal rate of return analysis can sometimes produce erroneous choices because they ignore the time value of money.

The process of making capital investment decisions often is referred to as ________________.

Kenner Company is considering two projects. Present value of an Annuity of $1 in Arrears - Which of the two projects, A or B, is better in terms of internal rate of return?

The two major categories of capital investment decision models are independent and mutually exclusive.

Two discounting models for capital investment decision making are net present value and internal rate of return.

Which of the following is preferred by managers when the risk of obsolescence is high?

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

In practice, managers often choose a discount rate that is higher than the cost of capital.

Match each item with the correct statement below. -comparison of actual benefits and costs of a project with the expected benefits and costs

Davis Company is considering the purchase of a new piece of equipment that will cost $1,600,000 and have a life of five years with no expected salvage value.The expected cash flows associated with the project are as follows: - What is the accounting rate of return for the project?

A company is considering two projects. What is the payback period for Project II?

The _______________________ is defined as the interest rate that sets the present value of a project's cash inflows equal to the present value of the project's cost.

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 two types of capital budgeting projects are ________________ and _______________.

The internal rate of return is the most widely used of the capital investment techniques.

Five mutually exclusive projects had the following information: Which project is preferred?

Companies that perform postaudits of capital projects experience a number of benefits.

When comparing the payback method and the accounting rate of return methods, which of the following is true?

The minimum acceptable rate of return for a project is the required rate of return.

Net present value analysis and internal rate of return analysis can sometimes produce erroneous choices because they ignore the time value of money.

The process of making capital investment decisions often is referred to as ________________.

Kenner Company is considering two projects. Present value of an Annuity of $1 in Arrears - Which of the two projects, A or B, is better in terms of internal rate of return?

The two major categories of capital investment decision models are independent and mutually exclusive.

Two discounting models for capital investment decision making are net present value and internal rate of return.

Which of the following is preferred by managers when the risk of obsolescence is high?

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

In practice, managers often choose a discount rate that is higher than the cost of capital.

Match each item with the correct statement below. -comparison of actual benefits and costs of a project with the expected benefits and costs

Davis Company is considering the purchase of a new piece of equipment that will cost $1,600,000 and have a life of five years with no expected salvage value.The expected cash flows associated with the project are as follows: - What is the accounting rate of return for the project?

A company is considering two projects. What is the payback period for Project II?

The _______________________ is defined as the interest rate that sets the present value of a project's cash inflows equal to the present value of the project's cost.

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

The two types of capital budgeting projects are __ and _.