Question 1

Which of the following is a weakness of the accounting rate of return?

Accepted Answer

A) It does not consider profit projections. 
B) It does not consider the time value of money. 
C) It ignores cash flows after the end of its useful life. 
D) It ignores the amount of revenues and expenses the project may generate. 
A) It does not consider profit projections. 
B) It does not consider the time value of money. 
C) It ignores cash flows after the end of its useful life. 
D) It ignores the amount of revenues and expenses the project may generate.

Question 2

Complete the following table by answering "Yes" and "No" in the columns that apply to each item.(First item is done for you.)

Accepted Answer

@#IMG-DLM& *Cash flo

Question 3

Capital assets are also referred to as

Accepted Answer

A) long-lived assets. 
B) balance sheet asset. 
C) cash assets. 
D) investment assets. 
A) long-lived assets. 
B) balance sheet asset. 
C) cash assets. 
D) investment assets.

Question 4

Wilson, Inc.has 6% discount rate.Using the tables, how much is the present value of a $22,000 payment received in 3 years?

Accepted Answer

A) $18,471 
B) $23,812 
C) $25,123 
D) $32,947 
A) $18,471 
B) $23,812 
C) $25,123 
D) $32,947

Question 5

Identify which of the following items are classified as capital assets.
a.Manufacturing equipment
b.Forklift
c.Janitorial supplies
d.Manufacturing overhead
e.Office furniture

Accepted Answer

a, b and e

Question 6

To determine the present value of any future amount, you need to know

Accepted Answer

A) the future amount to be received, the interest rate, and the hurdle rate. 
B) the interest rate, the cash flows to purchase the asset, and the future amount to be received. 
C) when the future amount will be received, the future amount to be received, and the interest rate. 
D) when the future amount will be received, the hurdle rate, and the cost of acquiring the asset. 
A) the future amount to be received, the interest rate, and the hurdle rate. 
B) the interest rate, the cash flows to purchase the asset, and the future amount to be received. 
C) when the future amount will be received, the future amount to be received, and the interest rate. 
D) when the future amount will be received, the hurdle rate, and the cost of acquiring the asset.

Question 7

If you wish to have $25,000 at the end of five years, Using the tables, how much must your deposit each year if you earn 12% compounded annually?

Accepted Answer

$25,000 ÷

Question 8

Which of the following is a limitation of the payback period method?

Accepted Answer

A) It ignores the time value of money. 
B) It ignores cash flows. 
C) It fails to consider the salvage value. 
D) It fails to consider the initial net cost of the asset. 
A) It ignores the time value of money. 
B) It ignores cash flows. 
C) It fails to consider the salvage value. 
D) It fails to consider the initial net cost of the asset.

Question 9

The payback period is a simple technique using the time value of money as its basis.

Accepted Answer

A) True 
 B)False

Question 10

Braxton Manufacturing is considering the purchase of new computerized equipment.The machine costs $85,000 and would generate $22,000 in annual cost savings over its 5-year life.At the end of 5 years, the equipment would have a $5,000 salvage value.Braxton's required rate of return is 12%.Using the interest tables, the machine's net present value is nearest

Accepted Answer

A) ($2,857). 
B) ($5,694). 
C) $79,306. 
D) $110,000. 
A) ($2,857). 
B) ($5,694). 
C) $79,306. 
D) $110,000.

Question 11

General Hospital is planning to add a new diagnostic machine which should improve its quality of certain blood tests.The machine under consideration has a cost of $79,189 and is expected to save the hospital $8,000 each year.The machine has an expected useful life of 14 years.
Required:
a.Calculate the internal rate of return on the diagnostic machine.
b.If the hospital uses a hurdle rate of 6%, should the diagnostic machine be purchased? Why or why not?

Accepted Answer

a.$79,189 ÷ $8,000 = 9.8986; i

Question 12

Why is the original purchase price of an old machine that is being replaced never included in capital budgeting decisions?

Accepted Answer

A) It is an opportunity cost, and thus not relevant. 
B) No future cash flows are associated with its purchase. 
C) It will affect future costs. 
D) It is a cost expensed when the new machine is acquired. 
A) It is an opportunity cost, and thus not relevant. 
B) No future cash flows are associated with its purchase. 
C) It will affect future costs. 
D) It is a cost expensed when the new machine is acquired.

Question 13

Which of the following is not a weakness of the accounting rate of return?

Accepted Answer

A) It does not consider cash flows. 
B) It does not consider the time value of money. 
C) The discount rate used in the calculation may change over the life of the investment. 
D) All of these answer choices are weaknesses of the accounting rate of return. 
A) It does not consider cash flows. 
B) It does not consider the time value of money. 
C) The discount rate used in the calculation may change over the life of the investment. 
D) All of these answer choices are weaknesses of the accounting rate of return.

Question 14

Bowen is considering the purchase of equipment costing $150,000.The equipment has a 12- year useful life, has an estimated salvage value of zero, and is expected to generate $25,000 in annual cash flows.The company has a 10% required rate of return and uses the straight-line depreciation method.The accounting rate of return on this equipment is closest to

Accepted Answer

A) 1.6%. 
B) 8.3%. 
C) 10%. 
D) 25%. 
A) 1.6%. 
B) 8.3%. 
C) 10%. 
D) 25%.

Question 15

Pilot Corporation is considering the purchase of equipment costing $100,000.The equipment will reduce operating cash expenses by $25,000 each year.The new equipment has a salvage value of $2,000 and will be depreciated over a 10-year useful life.The accounting rate of return is closest to

Accepted Answer

A) 15.2%. 
B) 25%. 
C) 25.5%. 
D) 35%. 
A) 15.2%. 
B) 25%. 
C) 25.5%. 
D) 35%.

Question 16

The goal of the screening decision process is to

Accepted Answer

A) Narrow the list of capital proposals to those expected to bring the desired level of return. 
B) Select the project with the best level of return. 
C) Arrange for the completion of the proposed project. 
D) Perform a post-implementation audit. 
A) Narrow the list of capital proposals to those expected to bring the desired level of return. 
B) Select the project with the best level of return. 
C) Arrange for the completion of the proposed project. 
D) Perform a post-implementation audit.

Question 17

Jonathan, a student at Local University, has decided to major in accounting because his goal is to become an FBI agent.Jonathan knows that accounting is one of the entry programs that qualify an applicant for a special agent career.As most students do, Jonathan wants to purchase a nice car when he graduates in five years with his master's degree.Because his expected salary will be good, he wants a high-performance sports car.He has found the car of his dreams for $58,000.Jonathan's parents have promised him a graduation present of $25,000 when he finishes his master's degree.
Required:
a.Calculate how much money Jonathan needs to deposit in his savings account today to be able to pay cash for the car upon graduation, assuming that his parents contribute what Jonathan expects.Jonathan can earn 8% on his deposit, compounded annually.
b.Calculate how much money Jonathan needs to deposit in his savings accountant today to be able to pay cash for the car upon graduation, assuming that his parents contribute what Jonathan expects.Jonathan can earn 8% on his deposit, compounded semi-annually.

Accepted Answer

a.$33,000* × 0.6806 = $22,460

Question 18

A stream of equal cash flows received at set time intervals is called an annuity.

Accepted Answer

A) True 
 B)False

Question 19

The payback period is defined as the amount of time, in years, that it takes

Accepted Answer

A) the company to provide a required return on the capital asset. 
B) for an investment to return the original amount of the capital plus the required rate of return. 
C) the company to earn enough profit generated from the capital asset to cover its cost. 
D) for an investment to return the original amount of invested capital. 
A) the company to provide a required return on the capital asset. 
B) for an investment to return the original amount of the capital plus the required rate of return. 
C) the company to earn enough profit generated from the capital asset to cover its cost. 
D) for an investment to return the original amount of invested capital.

Question 20

A dollar received today is worth

Accepted Answer

A) less than a dollar received in the future discounted at 12% interest. 
B) more than a dollar received at any time in the future. 
C) less than a dollar received in the future if the current interest rate is lower than the anticipated future interest rate. 
D) a dollar times the future value interest rate. 
A) less than a dollar received in the future discounted at 12% interest. 
B) more than a dollar received at any time in the future. 
C) less than a dollar received in the future if the current interest rate is lower than the anticipated future interest rate. 
D) a dollar times the future value interest rate.

Which of the following is a weakness of the accounting rate of return?

Complete the following table by answering "Yes" and "No" in the columns that apply to each item.(First item is done for you.)

Capital assets are also referred to as

Wilson, Inc.has 6% discount rate.Using the tables, how much is the present value of a $22,000 payment received in 3 years?

Identify which of the following items are classified as capital assets. a.Manufacturing equipment b.Forklift c.Janitorial supplies d.Manufacturing overhead e.Office furniture

To determine the present value of any future amount, you need to know

If you wish to have $25,000 at the end of five years, Using the tables, how much must your deposit each year if you earn 12% compounded annually?

Which of the following is a limitation of the payback period method?

The payback period is a simple technique using the time value of money as its basis.

Why is the original purchase price of an old machine that is being replaced never included in capital budgeting decisions?

Which of the following is not a weakness of the accounting rate of return?

Pilot Corporation is considering the purchase of equipment costing $100,000.The equipment will reduce operating cash expenses by $25,000 each year.The new equipment has a salvage value of $2,000 and will be depreciated over a 10-year useful life.The accounting rate of return is closest to

The goal of the screening decision process is to

A stream of equal cash flows received at set time intervals is called an annuity.

The payback period is defined as the amount of time, in years, that it takes

A dollar received today is worth

Accounting As a Tool for Management

Cost Behavior and Cost Estimation

Costvolumeprofit Analysis and Pricing Decisions

Product Costs and Job Order Costing

Planning and Forecasting in a Manufacturing Setting

Performance Evaluation: Variance Analysis

Activity-Based Costing and Activity-Based Management

Using Accounting Information to Make Managerial Decisions

Capital Budgeting

Decentralization and Performance Evaluation

Performance Evaluation Revisited: a Balanced Approach

Financial Statement Analysis

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Exam 9: Using Accounting Information to Make Managerial Decisions

Which of the following is a weakness of the accounting rate of return?

Complete the following table by answering "Yes" and "No" in the columns that apply to each item.(First item is done for you.)

Capital assets are also referred to as

Wilson, Inc.has 6% discount rate.Using the tables, how much is the present value of a $22,000 payment received in 3 years?

Identify which of the following items are classified as capital assets. a.Manufacturing equipment b.Forklift c.Janitorial supplies d.Manufacturing overhead e.Office furniture

To determine the present value of any future amount, you need to know

If you wish to have $25,000 at the end of five years, Using the tables, how much must your deposit each year if you earn 12% compounded annually?

Which of the following is a limitation of the payback period method?

The payback period is a simple technique using the time value of money as its basis.

Why is the original purchase price of an old machine that is being replaced never included in capital budgeting decisions?

Which of the following is not a weakness of the accounting rate of return?

Pilot Corporation is considering the purchase of equipment costing $100,000.The equipment will reduce operating cash expenses by $25,000 each year.The new equipment has a salvage value of $2,000 and will be depreciated over a 10-year useful life.The accounting rate of return is closest to

The goal of the screening decision process is to

A stream of equal cash flows received at set time intervals is called an annuity.

The payback period is defined as the amount of time, in years, that it takes

A dollar received today is worth

Accounting As a Tool for Management

Cost Behavior and Cost Estimation

Costvolumeprofit Analysis and Pricing Decisions

Product Costs and Job Order Costing

Planning and Forecasting in a Manufacturing Setting

Performance Evaluation: Variance Analysis

Activity-Based Costing and Activity-Based Management

Using Accounting Information to Make Managerial Decisions

Capital Budgeting

Decentralization and Performance Evaluation

Performance Evaluation Revisited: a Balanced Approach

Financial Statement Analysis

Filters