Question 1

Before you can calculate the present value of a cash flow, you must

Accepted Answer

A) identify the expenses and revenues for each time period. 
B) determine the appropriate discount rate. 
C) look up interest factors in the tables. 
D) use the replacement approach for the capital asset being evaluated. 
A) identify the expenses and revenues for each time period. 
B) determine the appropriate discount rate. 
C) look up interest factors in the tables. 
D) use the replacement approach for the capital asset being evaluated.

Question 2

Those assets that are expected to provide economic benefits for several years are called capital assets.

Accepted Answer

A) True 
 B)False

Question 3

Judy Blue, CEO of the clothing store All Blue, is planning to open a new store in Manhattan.She plans to purchase a small storefront for $5,250,000 which has a remaining useful life of 15 years.She plans to hire 2 part-time sales clerks and will pay each of them $34,000 per year in wages and other benefits.Judy expects that revenues will average $86,000 per month and other monthly operating costs will run $13,200.What is the accounting rate of return for the Manhattan store?

Accepted Answer

A) 15.3% 
B) 8.7% 
C) 10% 
D) 1.1% 
A) 15.3% 
B) 8.7% 
C) 10% 
D) 1.1%

Question 4

To calculate the present value of an annuity, multiply the

Accepted Answer

A) principal amount by the present value factor. 
B) amount to be received each year by the present value factor. 
C) principal by the discounted interest rate. 
D) amount to be received each year by the discounted interest rate. 
A) principal amount by the present value factor. 
B) amount to be received each year by the present value factor. 
C) principal by the discounted interest rate. 
D) amount to be received each year by the discounted interest rate.

Question 5

Which of the following is not a factor that influences the discount rate?

Accepted Answer

A) Amount of the cash flows 
B) Level of risk 
C) Investor's expected rate of return 
D) All of these answer choices are factors that influence the discount rate. 
A) Amount of the cash flows 
B) Level of risk 
C) Investor's expected rate of return 
D) All of these answer choices are factors that influence the discount rate.

Question 6

The interest rate used in present value calculations is called the

Accepted Answer

A) discount rate. 
B) preference rate. 
C) compound rate. 
D) screening rate. 
A) discount rate. 
B) preference rate. 
C) compound rate. 
D) screening rate.

Question 7

When a company recoups its original investment, the company has received a

Accepted Answer

A) return on investment. 
B) return of investment. 
C) return of contribution. 
D) hurdle rate. 
A) return on investment. 
B) return of investment. 
C) return of contribution. 
D) hurdle rate.

Question 8

ABC Manufacturing is evaluating two capital projects.The company's choice will be based on the profitability index.Project #1 has a present value of cash flows of $200,000 and a net initial investment of $180,000 while Project #2 has a present value of future cash flows of $820,000 and a net initial investment of $800,000.Using the tables, which project will ABC choose? Why?

Accepted Answer

@#IMG-DLM& ABC should choose Project #1

Question 9

Mauldin Welding Shop is considering the purchase of new high-tech welding equipment.If the equipment is purchased, Mauldin will incur an additional $8,000 in annual depreciation expense for the next five years.In determining the cash flows associated with the new equipment, the $8,000 of annual depreciation expense is

Accepted Answer

A) a cash outflow. 
B) a cash inflow. 
C) a sunk cost. 
D) ignored in the cash flow analysis. 
A) a cash outflow. 
B) a cash inflow. 
C) a sunk cost. 
D) ignored in the cash flow analysis.

Question 10

Andrea Kris is opening a small flower shop that will focus primarily on delivery, but will provide a small showroom for walk-in customers.A local florist is retiring and selling her small flower shop to Andrea for $162,500.The shop has a remaining life of 20 years.Andrea expects to have revenues of $81,250 per year and pay approximately 60% of revenues in operating costs.What is the accounting rate of return for Andrea's flower shop?

Accepted Answer

A) 15% 
B) 20% 
C) 45% 
D) 25% 
A) 15% 
B) 20% 
C) 45% 
D) 25%

Question 11

The payback period of a project that produces even cash flows each year is calculated by dividing the

Accepted Answer

A) net initial investment by the projected net annual cash flow. 
B) gross initial investment by the projected net annual cash flow. 
C) net initial investment by the projected annual cash inflows. 
D) gross initial investment by the projected annual cash inflows. 
A) net initial investment by the projected net annual cash flow. 
B) gross initial investment by the projected net annual cash flow. 
C) net initial investment by the projected annual cash inflows. 
D) gross initial investment by the projected annual cash inflows.

Question 12

The process of evaluating an organization's investment in long-term assets is called

Accepted Answer

A) activity-based evaluation. 
B) capital budgeting. 
C) investment control. 
D) A preference decision. 
A) activity-based evaluation. 
B) capital budgeting. 
C) investment control. 
D) A preference decision.

Question 13

What are the three factors needed to determine the present value of any future amount?

Accepted Answer

To determine the pre

Question 14

Assets used by an organization to build products or deliver services are called investment assets.

Accepted Answer

A) True 
 B)False

Question 15

The decision to replace old equipment with new equipment can be analyzed by the

Accepted Answer

A) incremental analysis or the replacement method. 
B) replacement method or use Excel. 
C) incremental analysis or calculating the cost of each decision separately. 
D) screening analysis or calculating the cost of each decision separately. 
A) incremental analysis or the replacement method. 
B) replacement method or use Excel. 
C) incremental analysis or calculating the cost of each decision separately. 
D) screening analysis or calculating the cost of each decision separately.

Question 16

The present value of a future amount may be smaller or larger than the future value.

Accepted Answer

A) True 
 B)False

Question 17

The net present value approach to capital budgeting requires you to calculate the present value of each cash flow and then add those present values to arrive at the capital project's net present value.

Accepted Answer

A) True 
 B)False

Question 18

You can use the factors in an annuity table method to calculate

Accepted Answer

A) the hurdle rate. 
B) the internal rate of return with uneven cash flows. 
C) the present value of a capital asset. 
D) the discount rate. 
A) the hurdle rate. 
B) the internal rate of return with uneven cash flows. 
C) the present value of a capital asset. 
D) the discount rate.

Question 19

Chris Mann will deposit $22,400 into an account today that earns 10% per year compounded annually.Using the following factors, what is the amount that will be in the account at the end of the 5 years?

Accepted Answer

A)    $36,075 
B) $13,909 
C) $27,351 
D) $18,681 
A)    $36,075 
B) $13,909 
C) $27,351 
D) $18,681

Question 20

Which of the following is the formula for the accounting rate of return?

Accepted Answer

A) Net initial investment ÷ Annual cash flow 
B) (Project revenue - Project operating expenses) ÷ (Initial investment - salvage of old asset) 
C) Present value of future cash flows ÷ Net initial investment 
D) Net initial investment ÷ Present value of future cash flows 
A) Net initial investment ÷ Annual cash flow 
B) (Project revenue - Project operating expenses) ÷ (Initial investment - salvage of old asset) 
C) Present value of future cash flows ÷ Net initial investment 
D) Net initial investment ÷ Present value of future cash flows

Before you can calculate the present value of a cash flow, you must

Those assets that are expected to provide economic benefits for several years are called capital assets.

To calculate the present value of an annuity, multiply the

Which of the following is not a factor that influences the discount rate?

The interest rate used in present value calculations is called the

When a company recoups its original investment, the company has received a

The payback period of a project that produces even cash flows each year is calculated by dividing the

The process of evaluating an organization's investment in long-term assets is called

What are the three factors needed to determine the present value of any future amount?

Assets used by an organization to build products or deliver services are called investment assets.

The decision to replace old equipment with new equipment can be analyzed by the

The present value of a future amount may be smaller or larger than the future value.

The net present value approach to capital budgeting requires you to calculate the present value of each cash flow and then add those present values to arrive at the capital project's net present value.

You can use the factors in an annuity table method to calculate

Chris Mann will deposit $22,400 into an account today that earns 10% per year compounded annually.Using the following factors, what is the amount that will be in the account at the end of the 5 years?

Which of the following is the formula for the accounting rate of return?

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

Before you can calculate the present value of a cash flow, you must

Those assets that are expected to provide economic benefits for several years are called capital assets.

To calculate the present value of an annuity, multiply the

Which of the following is not a factor that influences the discount rate?

The interest rate used in present value calculations is called the

When a company recoups its original investment, the company has received a

The payback period of a project that produces even cash flows each year is calculated by dividing the

The process of evaluating an organization's investment in long-term assets is called

What are the three factors needed to determine the present value of any future amount?

Assets used by an organization to build products or deliver services are called investment assets.

The decision to replace old equipment with new equipment can be analyzed by the

The present value of a future amount may be smaller or larger than the future value.

The net present value approach to capital budgeting requires you to calculate the present value of each cash flow and then add those present values to arrive at the capital project's net present value.

You can use the factors in an annuity table method to calculate

Chris Mann will deposit $22,400 into an account today that earns 10% per year compounded annually.Using the following factors, what is the amount that will be in the account at the end of the 5 years?

Which of the following is the formula for the accounting rate of return?

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