Number 13)

Number 15)

Number 17)

Olsen Inc. purchased a $570,000 machine to manufacture a specialty tap for electrical equipment. The tap is in high demand and Olsen can sell all that it could manufacture for the next 10 years. To encourage capital investments, the government exempts taxes on profits from new investments in this type of machinery. This legislation most likely will remain in effect in the foreseeable future. The equipment is expected to have 10 years of useful life and no salvage value at the end of this 10-year period. The firm uses straight-line depreciation. The net cash inflow is expected to be $152,000 each year. Olsen uses a discount rate of 10% in evaluating its capital investments. The accounting (book) rate of return (ARR) based on initial investment for this proposed investment (to two decimal places) is: Multiple Choice 16.67%. 30.67%. O 15.40%. 28.13%. The internal rate of return (IRR) is the Multiple Choice Required rate of return for new investment projects. Rate of interest (%) that equates the present value of after-tax cash outflows and the present value of after-tax cash inflows for a given project. Risk-adjusted rate of return. Weighted average rate of return generated by internally generated funds. Minimum acceptable rate of return for a proposed investment Accounting makes all the following contributions to the capital budgeting process except: Multiple Choice Performing sensitivity or "what-if" analysis of proposed capital investments. Generation of relevant (i.e., cash flow) data for investment-analysis purposes. Linkage of capital investment projects to the organization's Balanced Scorecard (BSC). Conducting post-audits of capital investment decisions. The theoretical development of appropriate decision models