Deck 12: Capital Investment Appraisal, and Corporate Governance and Sustainability

Question 1

Being straightforward and honest in all professional business relationships defines which fundamental principle of ethics for professional accountants?

A) Integrity
B) Objectivity
C) Confidentiality
D) Professional behaviour

Answer 1

Integrity

Question 2

The fundamental ethical principle of objectivity requires professional accountants to maintain independent judgement at all times.

Answer 2

True

Question 3

Which one of the following statements is not true?

A) The fundamental ethical principle of confidentiality requires that all information acquired by professional accountants in the course of their professional work must be kept confidential.
B) The fundamental ethical principle of integrity requires that professional accountants must be objective in all their professional and business judgements and dealings at all times.
C) Professional accountants must gain their professional qualification and then maintain their professional knowledge and skills through continuing professional education.
D) Professional accountants must avoid any actions that might bring discredit upon the accounting profession as a whole.

Answer 3

The fundamental ethical principle of integrity requires that professional accountants must be objective in all their professional and business judgements and dealings at all times.

Question 4

Interest rates are 10%. What is the present value of £60,000 receivable in 6 years' time?

A) £30,789
B) £33,868
C) £37,255
D) £106,294

Question 5

A proposed investment is projected to generate £180,000 a year for four years. An additional investment of £80,000 is budgeted at the end of year 2 of the project and the project assets are expected to be sold for £50,000 at the end of year 4. The company proposing the project has a cost of capital of 10%. The net present value of the project is £70,002. What is the cost of the initial investment into the project at T0?

A) £388,600
B) £434,450
C) £468,600
D) £538,602

Question 6

TPT Limited is planning to invest in a new project. The project will last for five years. Depreciation on project assets is provided on the straight-line basis over five years and will amount to £40,000 per annum. Net cash inflows from the project in years 1 to 5 are budgeted to be £80,000, £100,000, £120,000, £100,000 and £80,000. At the end of the five years, the project assets will be sold for £100,000. The payback period for the project is three years. What is the original cost of the investment in this project?

A) £180,000
B) £200,000
C) £300,000
D) £420,000

Question 7

The average annual accounting profit generated by a project x the accounting rate of return of that project = the average capital employed by that project.

Question 8

JVG Limited is planning a new project. The project will generate accounting profits of £380,000 over its five year life. The accounting rate of return of this project is 16%. What is the average capital employed by this project?

A) £12,160
B) £60,800
C) £475,000
D) £2,375,000

Question 9

A project has an accounting rate of return of 20%. The assets used in the project have an original cost of £500,000 and an expected resale value of £50,000 when the project comes to an end in 5 years' time. What are the total cash inflows expected from this project?

A) £275,000
B) £675,000
C) £700,000
D) £725,000