Question 1

The ___________________ is the minimum acceptable rate of return.

Accepted Answer

required rate of ret

Question 2

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

Accepted Answer

A)  4.5 year 
B)  2.5 years 
C)  5 years 
D)  3.5 years 
E)  4 years 
A)  4.5 year 
B)  2.5 years 
C)  5 years 
D)  3.5 years 
E)  4 years

Question 3

If the net present value of an investment is zero, the investment earns less than the minimum required rate of return.

Accepted Answer

A) True 
 B)False

Question 4

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 average annual income for this project?

Accepted Answer

A)  $900,000 
B)  $1,500,000 
C)  $600,000 
D)  $700,000 
E)  $300,000 
A)  $900,000 
B)  $1,500,000 
C)  $600,000 
D)  $700,000 
E)  $300,000

Question 5

Which of the following is true if net present value (NPV) is negative?

Accepted Answer

A)  The return on investment is less than the discount rate. 
B)  The return on investment is more than the discount rate. 
C)  The return on investment is equal to the discount rate. 
D)  The return on investment is equal to the growth rate. 
E)  The return on investment is greater than the growth rate. 
A)  The return on investment is less than the discount rate. 
B)  The return on investment is more than the discount rate. 
C)  The return on investment is equal to the discount rate. 
D)  The return on investment is equal to the growth rate. 
E)  The return on investment is greater than the growth rate.

Question 6

Match each item with the correct statement below.
-can be used to determine whether or not an investment will negatively affect key financial ratios

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 7

A disadvantage of the payback period is that it ignores a project's total profitability.

Accepted Answer

A) True 
 B)False

Question 8

Match each item with the correct statement below.
-earning of interest on interest

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 9

The absolute dollar measure of a project is given by:

Accepted Answer

A)  standard costing. 
B)  the net present value. 
C)  the kaizen method. 
D)  the accounting rate of return. 
E)  None of these 
A)  standard costing. 
B)  the net present value. 
C)  the kaizen method. 
D)  the accounting rate of return. 
E)  None of these

Question 10

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

Accepted Answer

A)  It is used only for independent projects. 
B)  It is used only for mutually exclusive projects. 
C)  It requires that funding for a project must come from sources with the same opportunity cost of funds. 
D)  It is used to determine whether or not a firm should accept a special order. 
E)  None of these. 
A)  It is used only for independent projects. 
B)  It is used only for mutually exclusive projects. 
C)  It requires that funding for a project must come from sources with the same opportunity cost of funds. 
D)  It is used to determine whether or not a firm should accept a special order. 
E)  None of these.

Question 11

A disadvantage of postaudits is that they are costly.

Accepted Answer

A) True 
 B)False

Question 12

The internal rate of return model does not consistently result in choices that maximize firm wealth.

Accepted Answer

A) True 
 B)False

Question 13

Tom has just invested $150,000 in a coffee shop.He expects to receive cash income of $10,000 a year.What is the payback period?

Accepted Answer

A)  19 years 
B)  31 years 
C)  22 years 
D)  10 years 
E)  15 years 
A)  19 years 
B)  31 years 
C)  22 years 
D)  10 years 
E)  15 years

Question 14

Match each item with the correct statement below.
-a series of equal future cash flows

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 15

Elizabeth Myers invested in a project that required an initial amount of $1,560, and returned one cash inflow of $12,000 at the end of the 18th year.A partial table of the present value of an annuity of $1 in arrears is as follows: 
 What is the internal rate of return for this investment?

Accepted Answer

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

Question 16

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)  ($33,000) 
B)  $45,200 
C)  $433,000 
D)  $33,000 
E)  ($177,280) 
A)  ($33,000) 
B)  $45,200 
C)  $433,000 
D)  $33,000 
E)  ($177,280)

Question 17

Companies considering projects with shorter lives are interested in longer payback periods.

Accepted Answer

A) True 
 B)False

Question 18

Neil Morrison has just invested $130,000 in a restaurant.He expects to receive income of $24,000 a year, and to have the investment for 8 years.What is the accounting rate of return?

Accepted Answer

A)  5.60% 
B)  18.46% 
C)  14.52% 
D)  12.41% 
E)  4.50% 
A)  5.60% 
B)  18.46% 
C)  14.52% 
D)  12.41% 
E)  4.50%

Question 19

Match each item with the correct statement below.
-can be used as a rough measure of risk and liquidity

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 20

Which of the following is true regarding the internal rate of return for a project?

Accepted Answer

A)  If the internal rate of return is less than the required rate of return, the project will be rejected. 
B)  If the internal rate of return is equal to the required rate of return, the net present value of the project is zero. 
C)  If the internal rate of return is more than the required rate of return, the project will be accepted. 
D)  Managers may believe (in most cases, incorrectly) that the internal rate of return is the compounded rate of return earned by the initial investment. 
E)  All of these. 
A)  If the internal rate of return is less than the required rate of return, the project will be rejected. 
B)  If the internal rate of return is equal to the required rate of return, the net present value of the project is zero. 
C)  If the internal rate of return is more than the required rate of return, the project will be accepted. 
D)  Managers may believe (in most cases, incorrectly) that the internal rate of return is the compounded rate of return earned by the initial investment. 
E)  All of these.

The ___________________ is the minimum acceptable rate of return.

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

If the net present value of an investment is zero, the investment earns less than the minimum required rate of return.

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 average annual income for this project?

Which of the following is true if net present value (NPV) is negative?

Match each item with the correct statement below. -can be used to determine whether or not an investment will negatively affect key financial ratios

A disadvantage of the payback period is that it ignores a project's total profitability.

Match each item with the correct statement below. -earning of interest on interest

The absolute dollar measure of a project is given by:

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

A disadvantage of postaudits is that they are costly.

The internal rate of return model does not consistently result in choices that maximize firm wealth.

Tom has just invested $150,000 in a coffee shop.He expects to receive cash income of $10,000 a year.What is the payback period?

Match each item with the correct statement below. -a series of equal future cash flows

Elizabeth Myers invested in a project that required an initial amount of $1,560, and returned one cash inflow of $12,000 at the end of the 18th year.A partial table of the present value of an annuity of $1 in arrears is as follows: What is the internal rate of return for this investment?

Companies considering projects with shorter lives are interested in longer payback periods.

Neil Morrison has just invested $130,000 in a restaurant.He expects to receive income of $24,000 a year, and to have the investment for 8 years.What is the accounting rate of return?

Match each item with the correct statement below. -can be used as a rough measure of risk and liquidity

Which of the following is true regarding the internal rate of return for a project?

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 ___________________ is the minimum acceptable rate of return.

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

If the net present value of an investment is zero, the investment earns less than the minimum required rate of return.

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 average annual income for this project?

Which of the following is true if net present value (NPV) is negative?

Match each item with the correct statement below. -can be used to determine whether or not an investment will negatively affect key financial ratios

A disadvantage of the payback period is that it ignores a project's total profitability.

Match each item with the correct statement below. -earning of interest on interest

The absolute dollar measure of a project is given by:

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

A disadvantage of postaudits is that they are costly.

The internal rate of return model does not consistently result in choices that maximize firm wealth.

Tom has just invested $150,000 in a coffee shop.He expects to receive cash income of $10,000 a year.What is the payback period?

Match each item with the correct statement below. -a series of equal future cash flows

Elizabeth Myers invested in a project that required an initial amount of $1,560, and returned one cash inflow of $12,000 at the end of the 18th year.A partial table of the present value of an annuity of $1 in arrears is as follows: What is the internal rate of return for this investment?

Companies considering projects with shorter lives are interested in longer payback periods.

Neil Morrison has just invested $130,000 in a restaurant.He expects to receive income of $24,000 a year, and to have the investment for 8 years.What is the accounting rate of return?

Match each item with the correct statement below. -can be used as a rough measure of risk and liquidity

Which of the following is true regarding the internal rate of return for a project?

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