Question 1

Supply the missing data for each of the following proposals:

Accepted Answer

a.
 @#IMG-DLM&_TB5540_00_TB5540_00 b.Payback perio

Question 2

Discounted cash flow methods of evaluating capital expenditures focuses on the operating income as calculated under accrual accounting rules.

Accepted Answer

A) True 
 B)False

Question 3

The net present value method assumes that project cash flows can be reinvested at the company's ________.

Accepted Answer

A) internal rate of return 
B) required rate of return 
C) growth rate 
D) accounting rate of return 
A) internal rate of return 
B) required rate of return 
C) growth rate 
D) accounting rate of return

Question 4

In the "make predictions" stage of the capital budgeting process,a company forecasts all potential net income additions those are attributable to the alternative projects.

Accepted Answer

A) True 
 B)False

Question 5

Ambinu Flower Company provides flowers and other nursery products for decorative purposes in medium to large sized restaurants and businesses.The company has been investigating the purchase of a new specially equipped van for deliveries.The van has a value of $133,750 with a six-year life.The expected additional cash inflows are $52,500 per year.What is the payback period for this investment?

Accepted Answer

A) 1)5 years 
B) 2)5 years 
C) 6 years 
D) 3)5 years 
A) 1)5 years 
B) 2)5 years 
C) 6 years 
D) 3)5 years

Question 6

Which of the following is a limitation of AARR method?

Accepted Answer

A) It is difficult to compare projects as its result is expressed in dollars and not in percentage terms. 
B) It does not consider income earned throughout a project's expected useful life. 
C) It does not track initial investment. 
D) It does not consider time value of money. 
A) It is difficult to compare projects as its result is expressed in dollars and not in percentage terms. 
B) It does not consider income earned throughout a project's expected useful life. 
C) It does not track initial investment. 
D) It does not consider time value of money.

Question 7

Bock Construction Company is considering four proposals for the construction of new loading facilities that will include the latest in ship loading/unloading equipment.After careful analysis,the company's accountant has developed the following information about the four proposals:
   
Required:
How can this information be used in the decision-making process for the new loading facilities? Does it cause any confusion?

Accepted Answer

The managers can use the information to

Question 8

In using the net present value method,only projects with a zero or positive net present value are acceptable because ________.

Accepted Answer

A) the return from these projects equals or exceeds the cost of capital 
B) a positive net present value on a particular project guarantees company profitability 
C) the company will be able to pay the necessary payments on any loans secured to finance the project 
D) it results in high payback period 
A) the return from these projects equals or exceeds the cost of capital 
B) a positive net present value on a particular project guarantees company profitability 
C) the company will be able to pay the necessary payments on any loans secured to finance the project 
D) it results in high payback period

Question 9

The discount rate used to calculate the NPV should be the interest rate that the company could borrow at to finance the proposed capital project.

Accepted Answer

A) True 
 B)False

Question 10

The galaxy Corporation disposes a capital asset with an original cost of $180,000 and accumulated depreciation of $91,000 for $47,000.The company's tax rate is 40%.Calculate the after-tax cash inflow from the disposal of the capital asset.

Accepted Answer

A) $16,800 
B) ($16,800) 
C) $63,800 
D) $89,000 
A) $16,800 
B) ($16,800) 
C) $63,800 
D) $89,000

Question 11

Which of the following best describes the internal rate-of-return (IRR)method?

Accepted Answer

A) it calculates the discount rate at which an investment's present value of the total of all expected cash inflows equals the present value of its expected cash outflows. 
B) it calculates the discount rate at which an investment's future value of all expected cash inflows equals the present value of its expected cash outflows. 
C) it calculates the discount rate at which an investment's total of all expected cash inflows equals the present value of its expected cash outflows. 
D) it calculates the discount rate at which sum of an investment's present value of all expected cash inflows equals the present value of its expected cash outflows. 
A) it calculates the discount rate at which an investment's present value of the total of all expected cash inflows equals the present value of its expected cash outflows. 
B) it calculates the discount rate at which an investment's future value of all expected cash inflows equals the present value of its expected cash outflows. 
C) it calculates the discount rate at which an investment's total of all expected cash inflows equals the present value of its expected cash outflows. 
D) it calculates the discount rate at which sum of an investment's present value of all expected cash inflows equals the present value of its expected cash outflows.

Supply the missing data for each of the following proposals:

Discounted cash flow methods of evaluating capital expenditures focuses on the operating income as calculated under accrual accounting rules.

The net present value method assumes that project cash flows can be reinvested at the company's ________.

In the "make predictions" stage of the capital budgeting process,a company forecasts all potential net income additions those are attributable to the alternative projects.

Which of the following is a limitation of AARR method?

In using the net present value method,only projects with a zero or positive net present value are acceptable because ________.

The discount rate used to calculate the NPV should be the interest rate that the company could borrow at to finance the proposed capital project.

The galaxy Corporation disposes a capital asset with an original cost of $180,000 and accumulated depreciation of $91,000 for $47,000.The company's tax rate is 40%.Calculate the after-tax cash inflow from the disposal of the capital asset.

Which of the following best describes the internal rate-of-return (IRR)method?

The Manager and Management Accounting

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets,direct-Cost Variances,and Management Control

Flexible Budgets, overhead Cost Variances, and Management Control

Inventory Costing and Capacity Analysis

Determining How Costs Behave

Decision Making and Relevant Information

Strategy,balanced Scorecard,and Strategic Profitability Analysis

Pricing Decisions and Cost Management

Cost Allocation, customer-Profitability Analysis, and Sales-Variance Analysis

Allocation of Support-Department Costs, common Costs, and Revenues

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, rework, and Scrap

Balanced Scorecard: Quality and Time

Inventory Management, just-In-Time, and Simplified Costing Methods

Management Control Systems, transfer Pricing, and Multinational Considerations

Performance Measurement, compensation, and Multinational Considerations

Filters

Exam 21: Capital Budgeting and Cost Analysis

Supply the missing data for each of the following proposals:

Discounted cash flow methods of evaluating capital expenditures focuses on the operating income as calculated under accrual accounting rules.

The net present value method assumes that project cash flows can be reinvested at the company's ________.

In the "make predictions" stage of the capital budgeting process,a company forecasts all potential net income additions those are attributable to the alternative projects.

Which of the following is a limitation of AARR method?

In using the net present value method,only projects with a zero or positive net present value are acceptable because ________.

The discount rate used to calculate the NPV should be the interest rate that the company could borrow at to finance the proposed capital project.

The galaxy Corporation disposes a capital asset with an original cost of $180,000 and accumulated depreciation of $91,000 for $47,000.The company's tax rate is 40%.Calculate the after-tax cash inflow from the disposal of the capital asset.

Which of the following best describes the internal rate-of-return (IRR)method?

The Manager and Management Accounting

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets,direct-Cost Variances,and Management Control

Flexible Budgets, overhead Cost Variances, and Management Control

Inventory Costing and Capacity Analysis

Determining How Costs Behave

Decision Making and Relevant Information

Strategy,balanced Scorecard,and Strategic Profitability Analysis

Pricing Decisions and Cost Management

Cost Allocation, customer-Profitability Analysis, and Sales-Variance Analysis

Allocation of Support-Department Costs, common Costs, and Revenues

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, rework, and Scrap

Balanced Scorecard: Quality and Time

Inventory Management, just-In-Time, and Simplified Costing Methods

Management Control Systems, transfer Pricing, and Multinational Considerations

Performance Measurement, compensation, and Multinational Considerations

Filters