- ?In equipment-replacement decisions, which one of the following does not affect the decision-making process?
- ?The term that refers to costs incurred in the past that are not relevant to a future decision is
- ?Which one of the following statements concerning cash flow determination for capital budgeting purposes is not correct?
- ?A depreciation tax shield is
- ?Lawson, Inc., is expanding its manufacturing plant, which requires an investment of $4 million in new equipment and plant modifications. Lawson’s sale...
- ?Kline Corporation is expanding its plant, which requires an investment of $8 million in new equipment. Kline’s sales are expected to increase by $6 mi...
- ?Regal Industries is replacing a grinder purchased 5 years ago for $15,000 with a new one costing $25,000 cash. The original grinder is being depreciat...
- ?Garfield, Inc., is considering a 10-year capital investment project with forecasted revenues of $40,000 per year and forecasted cash operating expense...
- ?The Moore Corporation is considering the acquisition of a new machine. The machine can be purchased for $90000; it will cost $6000 to transport to Moo...
- ?The Moore Corporation is considering the acquisition of a new machine. The machine can be purchased for $90000; it will cost $6000 to transport to Moo...
- ?Of the following decisions, capital budgeting techniques would least likely be used in evaluating the
- ?Metrejean Industries is analyzing a capital investment proposal for new equipment to produce a product over the next 8 years. At the end of 8 years, t...
- ?Kore Industries is analyzing a capital investment proposal for new equipment to produce a product over the next 8 years. The analyst is attempting to ...
- ?The Dickins Corporation is considering the acquisition of a new machine at a cost of $180,000. Transporting the machine to Dickins’ plant will cost $1...
- ?The Dickins Corporation is considering the acquisition of a new machine at a cost of $180000. Transporting the machine to Dickins’ plant will cost $12...
- ?The accounting rate of return
- ?What is a challenge that the long-term aspect of capital budgeting presents to the management accountant.
- ?Which of the following is not a category of relevant cash flows?
- ?The capital budgeting process contains several stages. At which stage are financial and nonfinancial factors addressed?
- ?Book rate of return is an unsatisfactory guide to selecting capital projects because I. It uses accrual accounting numbers. II. It compares a single...
- ?Book rate of return is an unsatisfactory guide to selecting capital projects because I. It uses accrual accounting numbers. II. It compares a single...
- ?The maximum benefit forgone by using a scarce resource for a given purpose and not for the next-best alternative is called
- ?Book rate of return is an unsatisfactory guide to selecting capital projects because I. It uses accrual accounting numbers. II. It compares a single...
- ?Post-investment audits
- ?Calamity Cauliflower Corporation is considering undertaking a capital project. The company would have to commit $24,000 of working capital in additio...
- ?Calamity Cauliflower Corporation is considering undertaking a capital project. The company would have to commit $24,000 of working capital in additio...
- ?Calamity Cauliflower Corporation is considering undertaking a capital project. The company would have to commit $24,000 of working capital in additio...
- ?A firm is considering a new capital project. A salvage company is offering the firm $800,000 for its old equipment. If the firm accepts the salvage co...
- ?Assume that the old equipment, which has not yet been fully depreciated, must be sold in order to purchase the new equipment. The entity’s policy is t...
- ?Which of the following is irrelevant in projecting the cash flows of the final year of a capital project?
- ?Capital budgeting is concerned with
- ?Capital budgeting is used for the decision analysis of
- ?The tax impact of equipment depreciation affects capital budgeting decisions. Currently, the Modified Accelerated Cost Recovery System (MACRS) is used...
- ?The tax impact of equipment depreciation affects capital budgeting decisions. Currently, the Modified Accelerated Cost Recovery System (MACRS) is used...
- ?Which one of the following capital investment evaluation methods does not take the time value of money into consideration?
- ?Capital investment projects include proposals for all of the following except
- ?Which one of the following items is least likely to directly impact an equipment replacement capital expenditure decision?
- ?Cora Lewis is performing an analysis to determine if her firm should invest in new equipment to produce a product recently developed by her firm. The ...
- ?In estimating “after-tax incremental cash flows” under discounted cash flow analysis for capital project evaluations, which one of the following optio...
- ?The stage of the capital budgeting process that has the most risk is
- ?Charles Company owns a building that originally cost $400,000 and has a current book value of $250,000. The building was financed by a loan that has o...
- ?Which one of the following procedures would most likely help managers identify errors in their capital budgeting decisions?
- ?The net present value (NPV) method of investment project analysis assumes that the project’s cash flows are reinvested at the
- ?The rankings of mutually exclusive investments determined using the internal rate of return method (IRR) and the net present value method (NPV) may be...
- ?Amster Corporation has not yet decided on its hurdle rate for use in the evaluation of capital budgeting projects. This lack of information will prohi...
- ?All of the following items are included in discounted cash flow analysis except
- ?The use of an accelerated method instead of the straight-line method of depreciation in computing the net present value of a project has the effect of...
- ?The NPV of a project has been calculated to be $215,000. Which one of the following changes in assumptions would decrease the NPV?
- ?A disadvantage of the net present value method of capital expenditure evaluation is that it
- ?Jackson Corporation uses net present value techniques in evaluating its capital investment projects. The company is considering a new equipment acquis...
- ?A weakness of the internal rate of return (IRR) approach for determining the acceptability of investments is that it
- ?The internal rate of return (IRR) is the
- ?Suzie owns a computer reselling business and is expanding it. She is presented with two options. Under Proposal A, the estimated investment for the ex...
- ?The net present value method of capital budgeting assumes that cash flows are reinvested at
- ?The net present value of a proposed investment is negative; therefore, the discount rate used must be
- ?Dr. G invested $10,000 in a lifetime annuity for his granddaughter Emily. The annuity is expected to yield $400 annually forever. What is the anticipa...
- ?Which of the following statements is most likely correct for a project costing $50,000 and returning $14,000 per year for 5 years?
- ?What is the approximate IRR for a project that costs $50,000 and provides cash inflows of $20,000 for 3 years?
- ?Pena Company is considering a project that calls for an initial cash outlay of $50,000. The expected net cash inflows from the project are $7,791 for ...
- ?Assume that the probability distribution of NPVs is normal. The firm considers true risk occurring if the project results in a NPV that is zero or les...
- ?Project 1 has an expected NPV of $120,000 and a standard deviation of $200,000. Project 2 has an expected NPV of $100,000 and a standard deviation of ...
- ?When using the net present value method for capital budgeting analysis, the required rate of return is called all of the following except the
- ?The internal rate of return for a project can be determined
- ?Carco, Inc., wants to use discounted cash flow techniques when analyzing its capital investment projects. The company is aware of the uncertainty invo...
- ?The accountant of Ronier, Inc., has prepared an analysis of a proposed capital project using discounted cash flow techniques. One manager has question...
- ?The internal rate of return on an investment
- ?The internal rate of return is
- ?All of the following are the rates used in net present value analysis except for the
- ?In evaluating a capital budget project, the use of the net present value (NPV) model is generally not affected by the
- ?An advantage of the net present value method over the internal rate of return model in discounted cash flow analysis is that the net present value met...
- ?Basic time value of money concepts concern Interest Factors Risk Cost of capital
- ?The present value may be calculated for discounted cash Inflows Outflows Annuities
- ?Brown and Company uses the internal rate of return (IRR) method to evaluate capital projects. Brown is considering four independent projects with the ...
- ?Depreciation is incorporated explicitly in the discounted cash flow analysis of an investment proposal because it
- ?The method that recognizes the time value of money by discounting the after-tax cash flows over the life of a project using the company’s minimum desi...
- ?A company has unlimited capital funds to invest. The decision rule for the company to follow in order to maximize shareholders’ wealth is to invest in...
- ?Future, Inc., is in the enviable situation of having unlimited capital funds. The best decision rule, in an economic sense, for it to follow would be ...
- ?The technique that recognizes the time value of money by discounting the after-tax cash flows for a project over its life to time period zero using th...
- ?Sarah Birdsong has prepared a net present value (NPV) analysis for a 15-year equipment modernization program. Her initial calculations include a serie...
- ?If the present value of expected cash inflows from a project equals the present value of expected cash outflows, the discount rate is the
- ?Bell Delivery Co. is financing a new truck with a loan of $30,000 to be repaid in five annual installments of $7,900 at the end of each year. What is ...
- ?All of the following are methods used to evaluate investments for capital budgeting decisions except
- ?For a given investment project, the interest rate at which the present value of the cash inflows equals the present value of the cash outflows is call...
- ?The net present value of an investment project represents the
- ?Wilcox Corporation won a settlement in a law suit and was offered four different payment alternatives by the defendant’s insurance company. A review o...
- ?Verla Industries is trying to decide which one of the following two options to pursue. Either option will take effect on January 1st of the next year....
- ?An investment decision is acceptable if the
- ?Which of the following is not a shortcoming of the internal rate of return (IRR) method?
- ?A company is in the process of evaluating a major product line expansion. Using a 14% discount rate the firm has calculated the present value of both ...
- ?With regard to a capital investment project, which one of the following statements best describes the relationship between the cost of capital and the...
- ?The primary advantage of using the internal rate of return (IRR) method to evaluate capital budgeting projects is that it
- ?A company invested $500,000 in a new project. The project is expected to yield annual incremental cash flows of $175,000 for 4 years. What is the appr...
- ?One disadvantage of using internal rate of return (IRR) is that it
- ?Assume that an investment project’s assumed cash flows are not changed but the assumed weighted-average cost of capital is reduced. What impact would ...
- ?The net present value (NPV) and the internal rate of return (IRR) capital budgeting methods make assumptions about the reinvestment rate of cash inflo...
- ?Which one of the following statements is correct regarding the net present value (NPV) and the internal rate of return (IRR) approaches to capital bud...
- ?eGoods is an online retailer. The management of eGoods is interested in purchasing and installing a new server for a total cost of $150,000. The contr...
- ?Mega Power estimates that the cost to decommission its nuclear power plant in today’s dollars is $500 million. This cost is expected to escalate at 5%...