Question 1

Projects that, if accepted preclude the acceptance of all other competing projects are called:

Accepted Answer

A)  Mutually exclusive projects 
B)  Independent projects 
C)  Dependent projects 
D)  Both b and c 
A)  Mutually exclusive projects 
B)  Independent projects 
C)  Dependent projects 
D)  Both b and c

Question 2

If the internal rate of return (IRR) is less than the cost of capital, then the investment is acceptable.

Accepted Answer

A) True 
 B)False

Question 3

Langueville Manufacturing Company is considering the following investment proposal:   The firm uses the straight-line method of depreciation with no mid-year convention.
What is the payback period in years approximated to two decimal points, assuming no taxes are paid?

Accepted Answer

A)  1.75 
B)  1.50 
C)  3.0 
D)  3.5 
A)  1.75 
B)  1.50 
C)  3.0 
D)  3.5

Question 4

Anselmo Corp. is considering the purchase of a new machine for $76,000. The machine would generate an annual cash flow of $23,214 for five years. At the end of five years, the machine would have no salvage value. The company's cost of capital is 12 percent. The company uses straight-line depreciation with no mid-year convention. What is the payback period in years for the machine approximated to two decimal points, assuming no taxes are paid?

Accepted Answer

A)  3.00 
B)  3.27 
C)  9.48 
D)  4.00 
A)  3.00 
B)  3.27 
C)  9.48 
D)  4.00

Question 5

Net present value (NPV) is the difference between the present value of cash inflows and outflows associated with a project.

Accepted Answer

A) True 
 B)False

Question 6

Clemente Company is considering the purchase of a new machine for $160,000. The machine would generate an annual cash flow before depreciation and taxes of $62,588 for four years. At the end of four years, the machine would have no salvage value. The company's cost of capital is 12 percent. The company uses straight-line depreciation with no mid-year convention and has a 40 percent tax rate. What is the net present value for the machine?

Accepted Answer

A)  ($45,952) 
B)  $162,640 
C)  $30,080 
D)  $2,640 
A)  ($45,952) 
B)  $162,640 
C)  $30,080 
D)  $2,640

Question 7

Which of the following methods consider the time value of money?

Accepted Answer

A)  payback and accounting rate of return 
B)  payback and internal rate of return 
C)  internal rate of return and accounting rate of return 
D)  internal rate of return and net present value 
A)  payback and accounting rate of return 
B)  payback and internal rate of return 
C)  internal rate of return and accounting rate of return 
D)  internal rate of return and net present value

Question 8

Bodacious Company is considering the purchase of a new machine for $80,000. The machine would generate an annual cash flow before depreciation and taxes of $28,778 for five years. At the end of five years, the machine would have no salvage value. The company's cost of capital is 12 percent. The company uses straight-line depreciation with no mid-year convention and has a 40 percent tax rate. What is the annual net after-tax cash flow (rounded)?

Accepted Answer

A)  $23,667 
B)  $8,633 
C)  $6,400 
D)  $28,778 
A)  $23,667 
B)  $8,633 
C)  $6,400 
D)  $28,778

Question 9

NVP measures the __________ in a firm's wealth caused by a project.

Accepted Answer

The answer of NVP measures the __________ in a firm's...

Question 10

Investment outlays may be affected by substantial resources required by __________ items.

Accepted Answer

The answer of Investment outlays may be affected by substantial...

Question 11

Gunslinger Company is considering the purchase of pipe cutting equipment. Data on the equipment are as follows:   The company uses the straight-line method of depreciation with no mid-year convention.
What is the accounting rate of return on original investment rounded to the nearest percent, assuming no taxes are paid?

Accepted Answer

A)  22.86% 
B)  2.86% 
C)  18% 
D)  4.86% 
A)  22.86% 
B)  2.86% 
C)  18% 
D)  4.86%

Question 12

In an independent project, the required rate of return is used to calculate the future value of future cash flows.

Accepted Answer

A) True 
 B)False

Question 13

Discounted cash flows are used by discounting models which are future cash flows expressed in terms of their present value.

Accepted Answer

A) True 
 B)False

Question 14

A capital investment project requires an investment of $100,000 and has an expected life of four years. Annual cash flows at the end of each year are expected to be as follows:   Ignoring income taxes, the net present value of the project using a 8 percent discount rate is

Accepted Answer

A)  $20,320 
B)  $49,680 
C)  ($49,680) 
D)  ($20,320) 
A)  $20,320 
B)  $49,680 
C)  ($49,680) 
D)  ($20,320)

Question 15

Evaristo Corporation is considering an investment in equipment for $45,000. Data related to the investment are as follows:   Cost of capital is 18 percent.
Evaristo uses the straight-line method of depreciation with no mid-year convention. In addition, its tax rate is 40 percent, and the life of the equipment is five years with no salvage value.
What is the payback period in years approximated to two decimal points?

Accepted Answer

A)  1.00 
B)  0.67 
C)  1.50 
D)  2.08 
A)  1.00 
B)  0.67 
C)  1.50 
D)  2.08

Question 16

When conflicting signals are received from using NPV and IRR, NPV always produces the correct signal to invest.

Accepted Answer

A) True 
 B)False

Question 17

Vendome Company is considering the purchase of the following computer equipment, which is considered 5-year property for tax purposes:   Vendome plans to use MACRS and keep the production equipment for seven years. (Round amounts to dollars.)
The tax savings from depreciation in Year 3 would be

Accepted Answer

A)  $38,400. 
B)  $28,570. 
C)  $71,428. 
D)  $96,000. 
A)  $38,400. 
B)  $28,570. 
C)  $71,428. 
D)  $96,000.

Question 18

Which of the following is NOT an example of information the payback period can provide to management?

Accepted Answer

A)  Minimize the impact of an investment on a firm's liquidity performance. 
B)  Help control the risks associated with the uncertainty of future cash flows. 
C)  Help control the risk of obsolescence. 
D)  Helps determine the project's total profitability. 
A)  Minimize the impact of an investment on a firm's liquidity performance. 
B)  Help control the risks associated with the uncertainty of future cash flows. 
C)  Help control the risk of obsolescence. 
D)  Helps determine the project's total profitability.

Question 19

Hollister Company is considering the purchase of a new machine for $60,000. The machine would generate an annual cash flow before depreciation and taxes of $25,647 for four years. At the end of four years, the machine would have no salvage value. The company's cost of capital is 12 percent. The company uses straight-line depreciation with no mid-year convention and has a 40 percent tax rate. What is the accounting rate of return on the original investment in the machine approximated to two decimal points?

Accepted Answer

A)  17.75% 
B)  12% 
C)  10.65% 
D)  25.65% 
A)  17.75% 
B)  12% 
C)  10.65% 
D)  25.65%

Question 20

A firm is evaluating a project that has a net present value of $0 when a discount rate of 8 percent is used. A discount rate of 6 percent will result in a

Accepted Answer

A)  negative net present value. 
B)  positive net present value. 
C)  net present value of $0. 
D)  the question cannot be answered based upon the information provided. 
A)  negative net present value. 
B)  positive net present value. 
C)  net present value of $0. 
D)  the question cannot be answered based upon the information provided.

Projects that, if accepted preclude the acceptance of all other competing projects are called:

If the internal rate of return (IRR) is less than the cost of capital, then the investment is acceptable.

Langueville Manufacturing Company is considering the following investment proposal: The firm uses the straight-line method of depreciation with no mid-year convention. What is the payback period in years approximated to two decimal points, assuming no taxes are paid?

Net present value (NPV) is the difference between the present value of cash inflows and outflows associated with a project.

Which of the following methods consider the time value of money?

NVP measures the __________ in a firm's wealth caused by a project.

Investment outlays may be affected by substantial resources required by __________ items.

In an independent project, the required rate of return is used to calculate the future value of future cash flows.

Discounted cash flows are used by discounting models which are future cash flows expressed in terms of their present value.

A capital investment project requires an investment of $100,000 and has an expected life of four years. Annual cash flows at the end of each year are expected to be as follows: Ignoring income taxes, the net present value of the project using a 8 percent discount rate is

When conflicting signals are received from using NPV and IRR, NPV always produces the correct signal to invest.

Vendome Company is considering the purchase of the following computer equipment, which is considered 5-year property for tax purposes: Vendome plans to use MACRS and keep the production equipment for seven years. (Round amounts to dollars.) The tax savings from depreciation in Year 3 would be

Which of the following is NOT an example of information the payback period can provide to management?

A firm is evaluating a project that has a net present value of $0 when a discount rate of 8 percent is used. A discount rate of 6 percent will result in a

Introduction to Cost Management

Basic Cost Management Concepts

Cost Behavior

Activity-Based Costing

Product and Service Costing: Job-Order System

Process Costing

Allocating Costs of Support Departments and Joint Products

Budgeting for Planning and Control Key

Standard Costing: a Functional-Based Control Approach

Decentralization: Responsibility Accounting, Performance Evaluation, and Transfer Pricing

Strategic Cost Management

Activity-Based Management

The Balanced Scorecard: Strategic-Based Control

Quality and Environmental Cost Management

Lean Accounting and Productivity Measurement

Cost-Volume-Profit Analysis

Activity Resource Usage Model and Tactical Decision Making

Pricing and Profitability Analysis

Inventory Management: Economic Order Quantity, Jit, and the Theory of Constraints

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Exam 19: Capital Investment

Projects that, if accepted preclude the acceptance of all other competing projects are called:

If the internal rate of return (IRR) is less than the cost of capital, then the investment is acceptable.

Langueville Manufacturing Company is considering the following investment proposal: The firm uses the straight-line method of depreciation with no mid-year convention. What is the payback period in years approximated to two decimal points, assuming no taxes are paid?

Net present value (NPV) is the difference between the present value of cash inflows and outflows associated with a project.

Which of the following methods consider the time value of money?

NVP measures the __________ in a firm's wealth caused by a project.

Investment outlays may be affected by substantial resources required by __________ items.

In an independent project, the required rate of return is used to calculate the future value of future cash flows.

Discounted cash flows are used by discounting models which are future cash flows expressed in terms of their present value.

A capital investment project requires an investment of $100,000 and has an expected life of four years. Annual cash flows at the end of each year are expected to be as follows: Ignoring income taxes, the net present value of the project using a 8 percent discount rate is

When conflicting signals are received from using NPV and IRR, NPV always produces the correct signal to invest.

Vendome Company is considering the purchase of the following computer equipment, which is considered 5-year property for tax purposes: Vendome plans to use MACRS and keep the production equipment for seven years. (Round amounts to dollars.) The tax savings from depreciation in Year 3 would be

Which of the following is NOT an example of information the payback period can provide to management?

A firm is evaluating a project that has a net present value of $0 when a discount rate of 8 percent is used. A discount rate of 6 percent will result in a

Introduction to Cost Management

Basic Cost Management Concepts

Cost Behavior

Activity-Based Costing

Product and Service Costing: Job-Order System

Process Costing

Allocating Costs of Support Departments and Joint Products

Budgeting for Planning and Control Key

Standard Costing: a Functional-Based Control Approach

Decentralization: Responsibility Accounting, Performance Evaluation, and Transfer Pricing

Strategic Cost Management

Activity-Based Management

The Balanced Scorecard: Strategic-Based Control

Quality and Environmental Cost Management

Lean Accounting and Productivity Measurement

Cost-Volume-Profit Analysis

Activity Resource Usage Model and Tactical Decision Making

Pricing and Profitability Analysis

Inventory Management: Economic Order Quantity, Jit, and the Theory of Constraints

Filters