Capital Budgeting MCQs

?

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. Lawsons sales...






?

Kline Corporation is expanding its plant, which requires an investment of $8 million in new equipment. Klines sales are expected to increase by $6 mil...






?

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...






?

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 entitys 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 projects 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 companys 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 defendants 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 woul...






?

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 ...