A flexible manufacturing system is expected to cost $25,000,000 but has present values of after-tax cash flow as shown in the table.The interest rate used is 10 percent.What is the payback of this investment? \[\begin{array} { | c | c | c | } \hline \text { Year } & \begin{array} { c } \text { Present } \\ \text { Value } \end{array} & \begin{array} { c } \text { Net Present } \\ \text { Value } \end{array} \\ \hline 1 & \$ 11,000,000 & \$ 10,000,100 \\ \hline 2 & \$ 9,000,000 & \$ 7,437,600 \\ \hline 3 & \$ 7,000,000 & \$ 5,259,800 \\ \hline 4 & \$ 5,000,000 & \$ 3,415,000 \\ \hline 5 & \$ 3,000,000 & \$ 1,862,700 \\ \hline \end{array}\]

A) Less than two years B) Between two and three years C) Between three and four years D) More than four years A) Less than two years B) Between two and three years C) Between three and four years D) More than four years

Exam 14: Financial Analysis

A poultry farmer is interested in purchasing an egg tester that can measure weight,albumin height,yolk color,and Haugh units all at the touch of a button.The unit will cost $6900 and is expected to last 10 years at which point it can be sold for $500 to a farmer in a less stringently controlled egg market.What is the annual depreciation under the straight line method?

Free

(Multiple Choice)

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Question 1

Correct Answer:

Verified

A

________ is an allowance for the consumption of capital.

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(Short Answer)

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Question 2

Correct Answer:

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Depreciation

The ________ is the concept that a dollar in hand today is worth more than a dollar to be received in the future.

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(Short Answer)

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Question 3

Correct Answer:

Verified

time value of money

The net present value (NPV)method must exceed a hurdle rate.

(True/False)

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Question 4

A flexible manufacturing system is expected to cost $25,000,000 but has present values of after-tax cash flow as shown in the table.The interest rate used is 10 percent.What is the payback of this investment? Year Present Value Net Present Value 1 \ 11,000,000 \ 10,000,100 2 \ 9,000,000 \ 7,437,600 3 \ 7,000,000 \ 5,259,800 4 \ 5,000,000 \ 3,415,000 5 \ 3,000,000 \ 1,862,700

(Multiple Choice)

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Question 5

The cash flow from the sale or disposal of plant and equipment at the end of a project's life is its ________.

(Short Answer)

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Question 6

Discounting is the process by which interest on an investment accumulates,and then earns interest itself for the remainder of the investment period. $\frac { \rho \lambda } { \mu - \lambda }$

(True/False)

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Question 7

It is estimated that the cost for the first year of college at Massive University,the state school with the best operations management program,will be $20,000 by the time your son is ready to matriculate.If prevailing interest rates will average 5 percent,what amount should you invest now to pay his tuition eight years from now?

(Multiple Choice)

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Question 8

Describe the basic techniques of financial analysis.

(Essay)

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Question 9

The time value of money implies that a dollar in hand today is worth more than a dollar to be received in the future.

(True/False)

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Question 10

Projects with the greatest strategic impact are likely to be riskier and have qualitative benefits that cannot easily be quantified.

(True/False)

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Question 11

The amount to be invested now to accumulate to a certain amount in the future at a specified interest rate is called the

(Multiple Choice)

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Question 12

The term ________ is often used to describe the common U.S.business practice of focusing on short-term results from low-risk projects via analysis by NPV or IRR calculations.

(Short Answer)

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Question 13

Cash flow is the cash that will flow into and out of the organization.

(True/False)

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Question 14

The hurdle rate is the interest rate that is the highest desired return on an investment.

(True/False)

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Question 15

The ________ is the discount rate that makes the NPV of a project zero.

(Short Answer)

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Question 16

An investor puts $10,000 in an account earning 4 percent compounded interest.At the end of three years,the account will have a value of

(Multiple Choice)

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Question 17

A poultry farmer is interested in purchasing an industrial egg tester that can measure weight,albumin height,yolk color,and Haugh units all at the touch of a button.The unit will cost $6900 and is expected to last 10 years at which point it can be sold for $1000 to a farmer in a less stringently controlled egg market.What is the annual depreciation for year 4 under the MACRS method? A copy of Table J.3 is below. Table J.3 Class of Investment Year 3-Year 5-Year 7-Year 10-Year 1 33.33 20.00 14.29 10.00 2 44.45 32.00 24.49 18.00 3 14.81 19.20 17.49 14.40 4 7.41 11.52 12.49 11.52 5 11.52 8.93 9.22 6 5.76 8.93 7.37 7 8.93 6.55 8 4.45 6.55 9 6.55 10 6.55 11 3.29

(Multiple Choice)

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Question 18

________ is the cash that will flow into and out of the organization.

(Short Answer)

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Question 19

Which of the following is an accelerated depreciation method?

(Multiple Choice)

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Question 20

________ is an allowance for the consumption of capital.

The ________ is the concept that a dollar in hand today is worth more than a dollar to be received in the future.

The net present value (NPV)method must exceed a hurdle rate.

The cash flow from the sale or disposal of plant and equipment at the end of a project's life is its ________.

Discounting is the process by which interest on an investment accumulates,and then earns interest itself for the remainder of the investment period. $\frac { \rho \lambda } { \mu - \lambda }$

Describe the basic techniques of financial analysis.

The time value of money implies that a dollar in hand today is worth more than a dollar to be received in the future.

Projects with the greatest strategic impact are likely to be riskier and have qualitative benefits that cannot easily be quantified.

The amount to be invested now to accumulate to a certain amount in the future at a specified interest rate is called the

The term ________ is often used to describe the common U.S.business practice of focusing on short-term results from low-risk projects via analysis by NPV or IRR calculations.

Cash flow is the cash that will flow into and out of the organization.

The hurdle rate is the interest rate that is the highest desired return on an investment.

The ________ is the discount rate that makes the NPV of a project zero.

An investor puts $10,000 in an account earning 4 percent compounded interest.At the end of three years,the account will have a value of

________ is the cash that will flow into and out of the organization.

Which of the following is an accelerated depreciation method?

Creating Customer Value through Operations

Supply Chain Management

Process Configuration

Capacity

Inventory Management

Quality and Process Improvement

Lean Systems

Managing Projects

Location and Layout

Managing Demand and Forecasting

Operations Planning and Scheduling

Resource Planning

Decision Making

Work Measurement

Learning Curve Analysis

Computer-Integrated Manufacturing

Acceptance Sampling Plans

Simulation

Special Inventory Models

Linear Programming

Waiting Lines

Filters

Exam 14: Financial Analysis

________ is an allowance for the consumption of capital.

The ________ is the concept that a dollar in hand today is worth more than a dollar to be received in the future.

The net present value (NPV)method must exceed a hurdle rate.

The cash flow from the sale or disposal of plant and equipment at the end of a project's life is its ________.

Discounting is the process by which interest on an investment accumulates,and then earns interest itself for the remainder of the investment period. ρλμ−λ\frac { \rho \lambda } { \mu - \lambda }μ−λρλ​

Describe the basic techniques of financial analysis.

The time value of money implies that a dollar in hand today is worth more than a dollar to be received in the future.

Projects with the greatest strategic impact are likely to be riskier and have qualitative benefits that cannot easily be quantified.

The amount to be invested now to accumulate to a certain amount in the future at a specified interest rate is called the

The term ________ is often used to describe the common U.S.business practice of focusing on short-term results from low-risk projects via analysis by NPV or IRR calculations.

Cash flow is the cash that will flow into and out of the organization.

The hurdle rate is the interest rate that is the highest desired return on an investment.

The ________ is the discount rate that makes the NPV of a project zero.

An investor puts $10,000 in an account earning 4 percent compounded interest.At the end of three years,the account will have a value of

________ is the cash that will flow into and out of the organization.

Which of the following is an accelerated depreciation method?

Creating Customer Value through Operations

Supply Chain Management

Process Configuration

Capacity

Inventory Management

Quality and Process Improvement

Lean Systems

Managing Projects

Location and Layout

Managing Demand and Forecasting

Operations Planning and Scheduling

Resource Planning

Decision Making

Work Measurement

Learning Curve Analysis

Computer-Integrated Manufacturing

Acceptance Sampling Plans

Simulation

Special Inventory Models

Linear Programming

Waiting Lines

Filters

Discounting is the process by which interest on an investment accumulates,and then earns interest itself for the remainder of the investment period. $\frac { \rho \lambda } { \mu - \lambda }$