Exam 14: Capital Investment Decisions

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.

(True/False)

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Question 141

Sometimes firms require riskier projects to have shorter payback periods.

(True/False)

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Question 142

Which of the following is characteristic of the measurement and use of indirect and intangible benefits in capital investment decision making?

(Multiple Choice)

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Question 143

What is another term for the required rate of return when using the net present value model?

(Multiple Choice)

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Question 144

An obvious advantage of postaudits is that the assumptions driving the original analysis my often be invalidated by changes in the actual operating environment.

(True/False)

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Question 145

Shore Builders is considering a project with an internal rate of return of 16.5%.Shore Builders requires a minimum rate of return of 14%.What is the net present value of the project?

(Multiple Choice)

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Question 146

In general,it is best if postaudits are done by company management,since they understand the actual operating conditions.

(True/False)

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Question 147

Why is a discount factor in year 3 less than a discount factor in year 2?

(Multiple Choice)

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Question 148

The two major categories of capital investment decision models are nondiscounting models and discounting models.

(True/False)

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Question 149

Henkle Company is considering a project with an initial investment of $626,500 in new equipment that will yield annual net cash flows of $90,000 and will be depreciated at $55,000 per year over its nine-year life.What is the accounting rate of return?

(Multiple Choice)

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Question 150

In order to use the payback period model,the proposed investment must have even cash inflows.

(True/False)

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Question 151

Buckhead Shop is considering the purchase of a used printing press costing $19,200.The printing press would generate a net cash inflow of $8,000 per year for five years.At the end of three years,the press would have no salvage value.The company's cost of capital is 10%.The company uses straight-line depreciation with no mid-year convention. Assume no taxes are paid.What would be the accounting rate of return on the original investment in the press to the nearest percent?

(Multiple Choice)

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Question 152

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

(Multiple Choice)

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Question 153

Showing 141 - 153 of 153

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.

Sometimes firms require riskier projects to have shorter payback periods.

Which of the following is characteristic of the measurement and use of indirect and intangible benefits in capital investment decision making?

What is another term for the required rate of return when using the net present value model?

An obvious advantage of postaudits is that the assumptions driving the original analysis my often be invalidated by changes in the actual operating environment.

Shore Builders is considering a project with an internal rate of return of 16.5%.Shore Builders requires a minimum rate of return of 14%.What is the net present value of the project?

In general,it is best if postaudits are done by company management,since they understand the actual operating conditions.

Why is a discount factor in year 3 less than a discount factor in year 2?

The two major categories of capital investment decision models are nondiscounting models and discounting models.

Henkle Company is considering a project with an initial investment of $626,500 in new equipment that will yield annual net cash flows of $90,000 and will be depreciated at $55,000 per year over its nine-year life.What is the accounting rate of return?

In order to use the payback period model,the proposed investment must have even cash inflows.

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

Introduction to Managerial Accounting

Basic Managerial Accounting Concepts

Cost Behaviour

Costvolumeprofit Analysis: a Managerial Planning Tool

Job-Order Costing

Process Costing

Activity-Based Costing and Management

Absorption and Variable Costing, and Inventory Management

Budgeting, production, cash, and Master Budget

Standard Costing: a Managerial Control Tool

Flexible Budgets and Overhead Analysis

Performance Evaluation and Decentralization

Short-Run Decision Making: Relevant Costing

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