Question 1

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 returnE) A) and B)
F) None of the above

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 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 4

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 5

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)  $89,000E) B) and C)
F) All of the above

Question 6

Supply the missing data for each of the following proposals:

Accepted Answer

a.

_TB5540_00_TB5540_00 b.Payback perio...

Question 7

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 periodE) All of the above
F) None of the above

Question 8

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 yearsE) B) and D)
F) A) and B)

Question 9

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.E) All of the above
F) B) and D)

Question 10

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.E) B) and D)
F) All of the above

Question 11

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

Exam 21: Capital Budgeting and Cost Analysis

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

Correct Answer
verified

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

Correct Answer
verified

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.

Correct Answer
verified

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.

Correct Answer
verified

Supply the missing data for each of the following proposals:

Correct Answer
verified
a.
_TB5540_00_TB5540_00 b.Payback perio...
View Answer

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.

Correct Answer
verified

Which of the following is a limitation of AARR method?

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified
The managers can use the information to ...
View Answer

Exam 21: Capital Budgeting and Cost Analysis

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

Supply the missing data for each of the following proposals:

Correct Answerverifieda. _TB5540_00_TB5540_00 b.Payback perio...View AnswerShow Answer

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.

Correct AnswerverifiedShow Answer

Which of the following is a limitation of AARR method?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThe managers can use the information to ...View AnswerShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
a.
_TB5540_00_TB5540_00 b.Payback perio...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The managers can use the information to ...
View Answer