Question 1

The first step in calculating the net present value of a product is to determine the appropriate discount rate.

Accepted Answer

A) True 
 B)False

Question 2

Capital assets are also referred to as long-lived assets.

Accepted Answer

A) True 
 B)False

Question 3

Given a present value factor of 0.7921, assuming a 6% discount rate, the present value of $16,000 payment received in 4 years is

Accepted Answer

A) $3,168. 
B) $12,674. 
C) $20,199. 
D) None of these answer choices are correct. 
A) $3,168. 
B) $12,674. 
C) $20,199. 
D) None of these answer choices are correct.

Question 4

Felder's manufacturing is considering the purchase of new equipment that costs $750,000 to replace equipment that is old and inefficient.Felder has found a buyer for the old equipment who will pay $8,000 for it.The new equipment is expected to produce $12,000 of additional revenue each year but will result in additional maintenance cost of $2,000.The new equipment will have a salvage of $10,000 and will be depreciated over 10 years.
Required:
Identify the amount and timing of the cash flows relevant to Felder's decision to purchase the new equipment.

Accepted Answer

The answer of Felder's manufacturing is considering the purchase of...

Question 5

Braxton Manufacturing is considering the purchase of new computerized equipment.The machine costs $75,000 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

Accepted Answer

A) $695. 
B) $4,305. 
C) $7,143. 
D) $79,306. 
A) $695. 
B) $4,305. 
C) $7,143. 
D) $79,306.

Question 6

In a predictable decision, a proposed project is compared to a performance benchmark to determine whether the project should be considered further.

Accepted Answer

A) True 
 B)False

Question 7

Keltner Enterprises is considering investing in a new packing machine.The new machine will provide annual cash operating inflows of $12,300 for 5 years.The cost of the machine is $42,300 and it can be sold at the end of its 5-year useful life for $6,800.Keltner's required rate of return is 10%.What is the packing machine's payback period?

Accepted Answer

A) 3.44 years 
B) 2.89 years 
C) 3.99 years 
D) 7.69 years 
A) 3.44 years 
B) 2.89 years 
C) 3.99 years 
D) 7.69 years

Question 8

Sycamore Industries has provided the following information on a proposed project:   Required: 
a.What is the payback period for the investment?
b.What is the simple rate of return on the investment?
c.What is the internal rate of return on the investment?

Accepted Answer

a.$140,000 ÷ $20,000 = 7 years

Question 9

In looking at the table for "Present Value of $1 Received in n Periods," the rows represent

Accepted Answer

A) possible hurdle rates. 
B) number of periods in the future. 
C) discount factors. 
D) cash flow amounts. 
A) possible hurdle rates. 
B) number of periods in the future. 
C) discount factors. 
D) cash flow amounts.

Question 10

The relationship between the discount rate and the present value is

Accepted Answer

A) inverse. 
B) proportional. 
C) constant. 
D) sporadic. 
A) inverse. 
B) proportional. 
C) constant. 
D) sporadic.

Question 11

The goal of the screening decision is to narrow the list of capital proposals to include only those that are expected to bring the desired level of return.

Accepted Answer

A) True 
 B)False

Question 12

Morrow Company is considering a purchase of equipment that costs $70,000.The equipment has a 7-year life and no salvage value.Morrow uses straight-line depreciation.The equipment has a payback period of 4 years.The accounting rate of return is closest to

Accepted Answer

A) 3.5%. 
B) 10.7%. 
C) 25%. 
D) 39%. 
A) 3.5%. 
B) 10.7%. 
C) 25%. 
D) 39%.

Question 13

Bend Manufacturers is considering investing in a new truck that will be used to deliver its custom-made furniture.Ron Shop, Controller of Bend Manufacturers, is considering a truck which will cost $80,000 and which has a useful life of 5 years.The new truck will save $9,600 per year in operating costs which are realized at the end of each year.Ron believes if the new truck is purchased it could be sold for $64,500 at the end of its useful life.Bend's required rate of return is 10%.What is the new truck's net present value?

Accepted Answer

A)    ($80) 
B) ($8,049) 
C) ($3,559) 
D) $18,658 
A)    ($80) 
B) ($8,049) 
C) ($3,559) 
D) $18,658

Question 14

When the interest from year one is built into the principal balance, the interest is referred to as

Accepted Answer

A) differential interest. 
B) discounted interest. 
C) compound interest. 
D) future interest accrued. 
A) differential interest. 
B) discounted interest. 
C) compound interest. 
D) future interest accrued.

Question 15

To determine the present value of any future amount, you need to know all of the following except?

Accepted Answer

A) the interest rate. 
B) the future amount to be received. 
C) the preference decision. 
D) when the future amount will be received. 
A) the interest rate. 
B) the future amount to be received. 
C) the preference decision. 
D) when the future amount will be received.

Question 16

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

Accepted Answer

A) This method includes an internal rate of return that is usually less than the required rate of return. 
B) The cash flows after the payback period needed for the calculation are not easy to estimate. 
C) This method ignores the time value of money. 
D) The discount rate used in the calculation often changes. 
A) This method includes an internal rate of return that is usually less than the required rate of return. 
B) The cash flows after the payback period needed for the calculation are not easy to estimate. 
C) This method ignores the time value of money. 
D) The discount rate used in the calculation often changes.

Question 17

Which of the following items is not included as a cash flow in the decision to purchase a new capital asset to replace an old one?

Accepted Answer

A) Depreciation on the new machine 
B) Sales tax 
C) Installation cost of the new machine 
D) Salvage value of the old machine 
A) Depreciation on the new machine 
B) Sales tax 
C) Installation cost of the new machine 
D) Salvage value of the old machine

Question 18

Any return a company receives over and above the original investment is referred to as

Accepted Answer

A) return on investment. 
B) return of investment. 
C) return of contribution. 
D) return for profit. 
A) return on investment. 
B) return of investment. 
C) return of contribution. 
D) return for profit.

Question 19

Johnson Whole Distributors is anticipating investing in equipment that cost $120,000.The equipment has an 8-year life and no salvage value.Johnson uses straight-line depreciation.The equipment has a payback period of 5 years.The accounting rate of return is closest to

Accepted Answer

A) 5%. 
B) 6.25%. 
C) 7.8%. 
D) 7.5%. 
A) 5%. 
B) 6.25%. 
C) 7.8%. 
D) 7.5%.

Question 20

If the net present value of a project is greater than or equal to zero, the project has achieved the required rate of return and should be accepted.

Accepted Answer

A) True 
 B)False

The first step in calculating the net present value of a product is to determine the appropriate discount rate.

Capital assets are also referred to as long-lived assets.

Given a present value factor of 0.7921, assuming a 6% discount rate, the present value of $16,000 payment received in 4 years is

In a predictable decision, a proposed project is compared to a performance benchmark to determine whether the project should be considered further.

Sycamore Industries has provided the following information on a proposed project: Required: a.What is the payback period for the investment? b.What is the simple rate of return on the investment? c.What is the internal rate of return on the investment?

In looking at the table for "Present Value of $1 Received in n Periods," the rows represent

The relationship between the discount rate and the present value is

The goal of the screening decision is to narrow the list of capital proposals to include only those that are expected to bring the desired level of return.

Morrow Company is considering a purchase of equipment that costs $70,000.The equipment has a 7-year life and no salvage value.Morrow uses straight-line depreciation.The equipment has a payback period of 4 years.The accounting rate of return is closest to

When the interest from year one is built into the principal balance, the interest is referred to as

To determine the present value of any future amount, you need to know all of the following except?

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

Which of the following items is not included as a cash flow in the decision to purchase a new capital asset to replace an old one?

Any return a company receives over and above the original investment is referred to as

Johnson Whole Distributors is anticipating investing in equipment that cost $120,000.The equipment has an 8-year life and no salvage value.Johnson uses straight-line depreciation.The equipment has a payback period of 5 years.The accounting rate of return is closest to

If the net present value of a project is greater than or equal to zero, the project has achieved the required rate of return and should be accepted.

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

The first step in calculating the net present value of a product is to determine the appropriate discount rate.

Capital assets are also referred to as long-lived assets.

Given a present value factor of 0.7921, assuming a 6% discount rate, the present value of $16,000 payment received in 4 years is

In a predictable decision, a proposed project is compared to a performance benchmark to determine whether the project should be considered further.

Sycamore Industries has provided the following information on a proposed project: Required: a.What is the payback period for the investment? b.What is the simple rate of return on the investment? c.What is the internal rate of return on the investment?

In looking at the table for "Present Value of $1 Received in n Periods," the rows represent

The relationship between the discount rate and the present value is

The goal of the screening decision is to narrow the list of capital proposals to include only those that are expected to bring the desired level of return.

Morrow Company is considering a purchase of equipment that costs $70,000.The equipment has a 7-year life and no salvage value.Morrow uses straight-line depreciation.The equipment has a payback period of 4 years.The accounting rate of return is closest to

When the interest from year one is built into the principal balance, the interest is referred to as

To determine the present value of any future amount, you need to know all of the following except?

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

Which of the following items is not included as a cash flow in the decision to purchase a new capital asset to replace an old one?

Any return a company receives over and above the original investment is referred to as

Johnson Whole Distributors is anticipating investing in equipment that cost $120,000.The equipment has an 8-year life and no salvage value.Johnson uses straight-line depreciation.The equipment has a payback period of 5 years.The accounting rate of return is closest to

If the net present value of a project is greater than or equal to zero, the project has achieved the required rate of return and should be accepted.

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