Question 1

Sometimes firms require riskier projects to have longer payback periods.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following methods helps in choosing the project that maximizes the wealth of shareholders?

Accepted Answer

A)  The net present value 
B)  The accounting rate of return 
C)  The payback period 
D)  The variance analysis 
E)  None of these 
A)  The net present value 
B)  The accounting rate of return 
C)  The payback period 
D)  The variance analysis 
E)  None of these

Question 3

Tetryl Company is considering a project with an initial investment of $200,000 in new equipment that will yield annual net cash flows of $48,000 and will depreciate at $24,000 per year over its eight year life.What is the accounting rate of return?

Accepted Answer

A)  37% 
B)  25% 
C)  12% 
D)  19% 
E)  54% 
A)  37% 
B)  25% 
C)  12% 
D)  19% 
E)  54%

Question 4

Taxes are important consideration in forecasting cash flows.

Accepted Answer

A) True 
 B)False

Question 5

Match each item with the correct statement below.
-is the best method discounting model to use for mutually exclusive competing projects

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 6

The reason that a discount factor in Year 3 is less than a discount factor in Year 2 is that

Accepted Answer

A)  cash flows are uneven. 
B)  compounding does not occur. 
C)  cash flows are even. 
D)  present value is positive. 
E)  a dollar received in 3 years is worth less than a dollar received in 2 years. 
A)  cash flows are uneven. 
B)  compounding does not occur. 
C)  cash flows are even. 
D)  present value is positive. 
E)  a dollar received in 3 years is worth less than a dollar received in 2 years.

Question 7

In capital investment decision making, it is usually assumed that managers should select projects that attempt to maximize the wealth of the owners of the firm.

Accepted Answer

A) True 
 B)False

Question 8

If the internal rate of return (IRR) is greater than the required rate, the project is deemed ___________.

Accepted Answer

The answer of If the internal rate of return (IRR)...

Question 9

Match each item with the correct statement below.
-assumes that all future cash inflows earn the same rate of return as the project itself

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 10

Buster Evans is considering investing $20,000 in a project with the following annual cash revenues and expenses:
 
 Depreciation will be $4,000 per year.
What is the accounting rate of return on the investment?

Accepted Answer

A)  15% 
B)  35% 
C)  70% 
D)  75% 
E)  None of these. 
A)  15% 
B)  35% 
C)  70% 
D)  75% 
E)  None of these.

Question 11

When choosing among competing projects, the ___________________ model correctly identifies the best investment alternative.

Accepted Answer

The answer of When choosing among competing projects, the ___________________...

Question 12

Less objective results are obtainable if an independent party performs the postaudit of a capital investment.

Accepted Answer

A) True 
 B)False

Question 13

Present value of $1 
  Present value of an Annuity of $1
 
Morgan Clinical Practice is considering an investment in new imaging equipment that will cost $400,000.The equipment is expected to yield cash inflows of $80,000 per year for a six year period.Morgan set a required rate of return at 10%.
- What is the net present value of Project 1? (Note: there may be a rounding error depending on the table you use to compute your answer.Choose the answer closest to the one you calculate.)

Accepted Answer

A)  $20,000 
B)  $25,670 
C)  $4,860 
D)  $22,530 
E)  $2,530 
A)  $20,000 
B)  $25,670 
C)  $4,860 
D)  $22,530 
E)  $2,530

Question 14

The amount that must be invested now to produce a future value is known as the ____________ of the future amount.

Accepted Answer

The answer of The amount that must be invested now...

Question 15

A postaudit is an analysis of a capital project before it is implemented.

Accepted Answer

A) True 
 B)False

Question 16

Amatra Inc., has the opportunity to invest in new equipment that will cost $113,000.The net cash inflows for ten years equal $20,000 per year.What is the internal rate of return for the investment? A partial table of the present value of an annuity of $1 in arrears is as follows:

Accepted Answer

A)  8% 
B)  10% 
C)  12% 
D)  14% 
E)  16% 
A)  8% 
B)  10% 
C)  12% 
D)  14% 
E)  16%

Question 17

Which of the following refers to the minimum acceptable rate of return?

Accepted Answer

A)  The standard rate 
B)  The contribution margin 
C)  The cost of capital 
D)  The future rate 
E)  All of these 
A)  The standard rate 
B)  The contribution margin 
C)  The cost of capital 
D)  The future rate 
E)  All of these

Question 18

A postaudit evaluates the overall outcome of the investment and proposes corrective action if needed.

Accepted Answer

A) True 
 B)False

Question 19

A firm is considering a project with an annual cash flow of $100,000.The project would have an 8-year life, and the company uses a discount rate of 5%.What is the maximum amount the company could invest in the project and have the project still be acceptable?

Accepted Answer

A)  $800,545 
B)  $646,321 
C)  $516,425 
D)  $960,110 
A)  $800,545 
B)  $646,321 
C)  $516,425 
D)  $960,110

Question 20

Jackson Company invests in a new piece of equipment costing $40,000.The equipment is expected to yield the following amounts per year for the equipment's four-year useful life:  
What is the net present value of this investment in equipment?

Accepted Answer

A)  $81,592 
B)  $41,592 
C)  $(4,480) 
D)  $52,452 
A)  $81,592 
B)  $41,592 
C)  $(4,480) 
D)  $52,452

Sometimes firms require riskier projects to have longer payback periods.

Which of the following methods helps in choosing the project that maximizes the wealth of shareholders?

Tetryl Company is considering a project with an initial investment of $200,000 in new equipment that will yield annual net cash flows of $48,000 and will depreciate at $24,000 per year over its eight year life.What is the accounting rate of return?

Taxes are important consideration in forecasting cash flows.

Match each item with the correct statement below. -is the best method discounting model to use for mutually exclusive competing projects

The reason that a discount factor in Year 3 is less than a discount factor in Year 2 is that

In capital investment decision making, it is usually assumed that managers should select projects that attempt to maximize the wealth of the owners of the firm.

If the internal rate of return (IRR) is greater than the required rate, the project is deemed ___________.

Match each item with the correct statement below. -assumes that all future cash inflows earn the same rate of return as the project itself

Buster Evans is considering investing $20,000 in a project with the following annual cash revenues and expenses: Depreciation will be $4,000 per year. What is the accounting rate of return on the investment?

When choosing among competing projects, the ___________________ model correctly identifies the best investment alternative.

Less objective results are obtainable if an independent party performs the postaudit of a capital investment.

The amount that must be invested now to produce a future value is known as the ____________ of the future amount.

A postaudit is an analysis of a capital project before it is implemented.

Amatra Inc., has the opportunity to invest in new equipment that will cost $113,000.The net cash inflows for ten years equal $20,000 per year.What is the internal rate of return for the investment? A partial table of the present value of an annuity of $1 in arrears is as follows:

Which of the following refers to the minimum acceptable rate of return?

A postaudit evaluates the overall outcome of the investment and proposes corrective action if needed.

A firm is considering a project with an annual cash flow of $100,000.The project would have an 8-year life, and the company uses a discount rate of 5%.What is the maximum amount the company could invest in the project and have the project still be acceptable?

Jackson Company invests in a new piece of equipment costing $40,000.The equipment is expected to yield the following amounts per year for the equipment's four-year useful life: What is the net present value of this investment in equipment?

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

Sometimes firms require riskier projects to have longer payback periods.

Which of the following methods helps in choosing the project that maximizes the wealth of shareholders?

Tetryl Company is considering a project with an initial investment of $200,000 in new equipment that will yield annual net cash flows of $48,000 and will depreciate at $24,000 per year over its eight year life.What is the accounting rate of return?

Taxes are important consideration in forecasting cash flows.

Match each item with the correct statement below. -is the best method discounting model to use for mutually exclusive competing projects

The reason that a discount factor in Year 3 is less than a discount factor in Year 2 is that

In capital investment decision making, it is usually assumed that managers should select projects that attempt to maximize the wealth of the owners of the firm.

If the internal rate of return (IRR) is greater than the required rate, the project is deemed ___________.

Match each item with the correct statement below. -assumes that all future cash inflows earn the same rate of return as the project itself

Buster Evans is considering investing $20,000 in a project with the following annual cash revenues and expenses: Depreciation will be $4,000 per year. What is the accounting rate of return on the investment?

When choosing among competing projects, the ___________________ model correctly identifies the best investment alternative.

Less objective results are obtainable if an independent party performs the postaudit of a capital investment.

The amount that must be invested now to produce a future value is known as the ____________ of the future amount.

A postaudit is an analysis of a capital project before it is implemented.

Amatra Inc., has the opportunity to invest in new equipment that will cost $113,000.The net cash inflows for ten years equal $20,000 per year.What is the internal rate of return for the investment? A partial table of the present value of an annuity of $1 in arrears is as follows:

Which of the following refers to the minimum acceptable rate of return?

A postaudit evaluates the overall outcome of the investment and proposes corrective action if needed.

A firm is considering a project with an annual cash flow of $100,000.The project would have an 8-year life, and the company uses a discount rate of 5%.What is the maximum amount the company could invest in the project and have the project still be acceptable?

Jackson Company invests in a new piece of equipment costing $40,000.The equipment is expected to yield the following amounts per year for the equipment's four-year useful life: What is the net present value of this investment in equipment?

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