1 Which of the following is a drawback of the payback period a it ignores a projects total profitability b it uses a set discount rate c it considers total profitability, requiring the forecasting of all future ca sh flows d it uses before tax cash flows rather than after tax cash flows e it uses operating income rather than cash flows 2 If net present value is negative, it means that the return on the investment is a less than the discount rate b more than the discount rate c equal to the discount rate d acceptable e It doesnt mean anything since the return on the investment bears no relationship to the discount rate 3 The interest rate that sets the present value of a projects cash inflows equal to the present value of the projects cost is called the a present value b discount rate c internal rate of return d payback period e company cost of capital 4 The best model for choosing the best of several competing projects is a net present value b internal rate of return c payback period d accounting rate of return e none of these 5 Island Princess Pineapples purchases pineapples from area farmers and processes them into rings, juice, and skins The cost of the pineapples is a joint cost, as is the initial processing in which the fruits are skinned, cored, and sliced into rings At the split off point, Island Princess sells the skins (for fertilizer) Juice and rings are processed further (further processing costs occurs for cooking and canning) Data for the three products follows Sales Rings $2,000 Juice $1,500 Fertilizer $400 Further processing costs Rings 500 Juice 300 Joint costs $1,600 A Prepare a segmented income statement for Isl and Princess, showing results for rings, juice, fertilizer, and in total Do not allocate joint costs individually B Now suppose that Island Princess is considering the option of processing the skins further into pet food which would sell fo r $1,000 Additional costs would be $450 Should this be done Will rate life saver for ALL answered correct

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1. Which of the following is a drawback of the payback period? a. it ignores a projects total profitability b. it uses a set discount

1. Which of the following is a drawback of the payback period?

a.	it ignores a projects total profitability
b.	it uses a set discount rate
c.	it considers total profitability, requiring the forecasting of all future cash flows
d.	it uses before-tax cash flows rather than after-tax cash flows
e.	it uses operating income rather than cash flows

2. If net present value is negative, it means that the return on the investment is

a.	less than the discount rate
b.	more than the discount rate
c.	equal to the discount rate
d.	acceptable
e.	It doesnt mean anything since the return on the investment bears no relationship to the discount rate.

3. The interest rate that sets the present value of a projects cash inflows equal to the present value of the projects cost is called the ____.

a.	present value
b.	discount rate
c.	internal rate of return
d.	payback period
e.	company cost of capital

4. The best model for choosing the best of several competing projects is

a.	net present value.
b.	internal rate of return.
c.	payback period.
d.	accounting rate of return.
e.	none of these.

5. Island Princess Pineapples purchases pineapples from area farmers and processes them into rings, juice, and skins. The cost of the pineapples is a joint cost, as is the initial processing in which the fruits are skinned, cored, and sliced into rings. At the split off point, Island Princess sells the skins (for fertilizer). Juice and rings are processed further (further processing costs occurs for cooking and canning). Data for the three products follows:

Sales
	Rings	$2,000
	Juice	$1,500
	Fertilizer	$400
Further processing costs:
	Rings	500
	Juice	300
Joint costs		$1,600

A. Prepare a segmented income statement for Island Princess, showing results for rings, juice, fertilizer, and in total. Do not allocate joint costs individually.

B. Now suppose that Island Princess is considering the option of processing the skins further into pet food which would sell for $1,000. Additional costs would be $450. Should this be done?

Will rate life saver for ALL answered correct!