Question 1

Which of the following evaluates the actual performance of a project in relation to its expected performance?

Accepted Answer

A)  The accounting rate of return 
B)  The average returns 
C)  The postaudit 
D)  The payback period 
E)  The internal rate of return 
A)  The accounting rate of return 
B)  The average returns 
C)  The postaudit 
D)  The payback period 
E)  The internal rate of return

Question 2

If cash flows are uneven, the payback period assumes that the inflows during the last fraction of a year occur evenly.

Accepted Answer

A) True 
 B)False

Question 3

Projects that if accepted preclude the acceptance of all other competing projects are called mutually exclusive projects.

Accepted Answer

A) True 
 B)False

Question 4

Sony Lavery is considering investing $45,000 in a project with the following cash revenues and expenses:  
   
-
Assuming straight-line depreciation over 8 years, what is the payback period for the project?

Accepted Answer

A)  between 4 and 5 years 
B)  between 2 and 3 years 
C)  between 5 and 6 years 
D)  between 7 and 8 years 
E)  between 6 and 7 years 
A)  between 4 and 5 years 
B)  between 2 and 3 years 
C)  between 5 and 6 years 
D)  between 7 and 8 years 
E)  between 6 and 7 years

Question 5

A division manager was considering a project that required a significant initial investment.If accepted, the project could have a negative impact on certain financial ratios that the firm was required to maintain to satisfy debt contracts.To ensure that the ratios would not be adversely affected by the investment, the manager would 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 6

Suppose that the actual cost of capital is 10%, but the firm chooses a discount rate of 18%.Managers of that company will be more likely to choose relatively short term investments.

Accepted Answer

A) True 
 B)False

Question 7

Tangarine Company is considering a project with an internal rate of return of 12%.Tangarine requires a minimum rate of return of 10%.The net present value of the project is:

Accepted Answer

A)  negative. 
B)  infinite. 
C)  equal to zero. 
D)  positive. 
E)  None of these 
A)  negative. 
B)  infinite. 
C)  equal to zero. 
D)  positive. 
E)  None of these

Question 8

An obvious problem with postaudits is that the assumptions driving the original analysis may often be invalidated by changes in the actual operating environment.

Accepted Answer

A) True 
 B)False

Question 9

A key element in the capital investment process is a follow-up analysis of a capital project once it is implemented; this analysis is a called a _____________.

Accepted Answer

The answer of A key element in the capital investment...

Question 10

_______________________ are concerned with the process of planning, setting goals and priorities, arranging financing, and using certain criteria to select long-term assets.

Accepted Answer

Capital in

Question 11

Which of the following methods assumes that each cash inflow is reinvested at the rate at which the present value of a project's cash inflows equal the present value of its cash outflows?

Accepted Answer

A)  The net present value 
B)  The average rate of return 
C)  The ratio analysis 
D)  The internal rate of return 
E)  None of these 
A)  The net present value 
B)  The average rate of return 
C)  The ratio analysis 
D)  The internal rate of return 
E)  None of these

Question 12

Because of the postaudit, managers are more likely to make capital investment decisions in the best interests of the firm.

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 the investment? (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)  $51,600 
B)  ($51,600) 
C)  $348,400 
D)  ($348,600) 
E)  $451,600 
A)  $51,600 
B)  ($51,600) 
C)  $348,400 
D)  ($348,600) 
E)  $451,600

Question 14

Tina invested in a project with a payback period of 4 years.The project brings $20,000 per year for a period of 10 years.What was the initial investment?

Accepted Answer

A)  $80,000 
B)  $107,500 
C)  $162,000 
D)  $240,000 
E)  Cannot be determined from this information. 
A)  $80,000 
B)  $107,500 
C)  $162,000 
D)  $240,000 
E)  Cannot be determined from this information.

Question 15

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

Accepted Answer

A)  2 years 
B)  4.5 years 
C)  3.5 years 
D)  2.5 years 
E)  3 years 
A)  2 years 
B)  4.5 years 
C)  3.5 years 
D)  2.5 years 
E)  3 years

Question 16

Present value of an Annuity of $1 in Arrears  
  
- Ruby Company is considering a project with an initial investment of $300,000 that will yield annual net cash flows of $90,580 and will be depreciated at $75,000 per year over its 4 year life.What is the internal rate of return? (Note: Round the discount factor to three decimal places.)

Accepted Answer

A)  6% 
B)  8% 
C)  10% 
D)  12% 
E)  14% 
A)  6% 
B)  8% 
C)  10% 
D)  12% 
E)  14%

Question 17

_______________________ are the future cash flows expressed in terms of their present value.

Accepted Answer

Discounted

Question 18

Mark is considering investing $90,000 in a project with the following cash revenues and expenses:  
 
  What is the accounting rate of return for the project?

Accepted Answer

A)  14% 
B)  15% 
C)  7% 
D)  3% 
E)  Cannot be calculated with this information 
A)  14% 
B)  15% 
C)  7% 
D)  3% 
E)  Cannot be calculated with this information

Question 19

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

Accepted Answer

A)  present value 
B)  discount rate 
C)  company cost of capital 
D)  payback period 
E)  internal rate of return 
A)  present value 
B)  discount rate 
C)  company cost of capital 
D)  payback period 
E)  internal rate of return

Question 20

A firm is considering a project with an annual cash flow of $300,000.The project would have a five year life, and the company uses a discount rate of 12%.What is the maximum amount the company could invest in the project and have the project still be acceptable?

Accepted Answer

A)  $2,180,143 
B)  $1,650,159 
C)  $1,081,434 
D)  $3,150,562 
A)  $2,180,143 
B)  $1,650,159 
C)  $1,081,434 
D)  $3,150,562

Which of the following evaluates the actual performance of a project in relation to its expected performance?

If cash flows are uneven, the payback period assumes that the inflows during the last fraction of a year occur evenly.

Projects that if accepted preclude the acceptance of all other competing projects are called mutually exclusive projects.

Sony Lavery is considering investing $45,000 in a project with the following cash revenues and expenses: - Assuming straight-line depreciation over 8 years, what is the payback period for the project?

Suppose that the actual cost of capital is 10%, but the firm chooses a discount rate of 18%.Managers of that company will be more likely to choose relatively short term investments.

Tangarine Company is considering a project with an internal rate of return of 12%.Tangarine requires a minimum rate of return of 10%.The net present value of the project is:

An obvious problem with postaudits is that the assumptions driving the original analysis may often be invalidated by changes in the actual operating environment.

A key element in the capital investment process is a follow-up analysis of a capital project once it is implemented; this analysis is a called a _____________.

_______________________ are concerned with the process of planning, setting goals and priorities, arranging financing, and using certain criteria to select long-term assets.

Which of the following methods assumes that each cash inflow is reinvested at the rate at which the present value of a project's cash inflows equal the present value of its cash outflows?

Because of the postaudit, managers are more likely to make capital investment decisions in the best interests of the firm.

Tina invested in a project with a payback period of 4 years.The project brings $20,000 per year for a period of 10 years.What was the initial investment?

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

_______________________ are the future cash flows expressed in terms of their present value.

Mark is considering investing $90,000 in a project with the following cash revenues and expenses: What is the accounting rate of return for the project?

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

A firm is considering a project with an annual cash flow of $300,000.The project would have a five year life, and the company uses a discount rate of 12%.What is the maximum amount the company could invest in the project and have the project still be acceptable?

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

Which of the following evaluates the actual performance of a project in relation to its expected performance?

If cash flows are uneven, the payback period assumes that the inflows during the last fraction of a year occur evenly.

Projects that if accepted preclude the acceptance of all other competing projects are called mutually exclusive projects.

Sony Lavery is considering investing $45,000 in a project with the following cash revenues and expenses: - Assuming straight-line depreciation over 8 years, what is the payback period for the project?

Suppose that the actual cost of capital is 10%, but the firm chooses a discount rate of 18%.Managers of that company will be more likely to choose relatively short term investments.

Tangarine Company is considering a project with an internal rate of return of 12%.Tangarine requires a minimum rate of return of 10%.The net present value of the project is:

An obvious problem with postaudits is that the assumptions driving the original analysis may often be invalidated by changes in the actual operating environment.

A key element in the capital investment process is a follow-up analysis of a capital project once it is implemented; this analysis is a called a _____________.

_______________________ are concerned with the process of planning, setting goals and priorities, arranging financing, and using certain criteria to select long-term assets.

Which of the following methods assumes that each cash inflow is reinvested at the rate at which the present value of a project's cash inflows equal the present value of its cash outflows?

Because of the postaudit, managers are more likely to make capital investment decisions in the best interests of the firm.

Tina invested in a project with a payback period of 4 years.The project brings $20,000 per year for a period of 10 years.What was the initial investment?

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

_______________________ are the future cash flows expressed in terms of their present value.

Mark is considering investing $90,000 in a project with the following cash revenues and expenses: What is the accounting rate of return for the project?

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

A firm is considering a project with an annual cash flow of $300,000.The project would have a five year life, and the company uses a discount rate of 12%.What is the maximum amount the company could invest in the project and have the project still be acceptable?

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