Please choose the best letter for each question 1 8 Average rate of return is calculated by using which of the following formulas a Estimated Average Annual Income Average Investment b Average Investment Residual Value c (Initial Cost Residual Value) 2 d Estimated Average Annual Income Residual Value Capital investment evaluation methods can be grouped into which of the following two general categories a Methods that do not use present values and methods that use present values b Methods that do not use variable costing and methods that use variable costing c Methods that use absorption costing analysis and methods that use incremental analysis d Methods that use average rate of return and methods that use differential analysis All of the following are disadvantages of using the average rate of return except a the average rate of return method does not use present values b the average rate of return method does not consider the timing of the expected cash flows c the average rate of return method includes the entire amount of income earned over the life of the proposal d the average rate of return method does not directly consider the expected cash flows from the proposal The following table is for the present value of $1 at compound interest Year 6 10 12 1 0 943 0 909 0 893 2 0 890 0 826 0 797 3 0 840 0 751 0 712 4 0 792 0 683 0 636 5 0 747 0 621 0 567 The following table is for the present value of an annuity of $1 at compound interest Year 6 10 12 1 0 943 0 909 0 893 2 1 833 1 736 1 690 3 2 673 2 487 2 402 4 3 465 3 170 3 037 5 4 212 3 791 3 605 Using these tables, what would be the present value of $15,000 (rounded to the nearest dollar) to be received 3 years from today, assuming an earnings rate of 6 a $14,145 b $40,095 c $12,600 d $13,350 An advantage of the internal rate of return method is that a it considers the cash flows of the investment b it considers the time value of money c it can rank proposals of equal lives d All of these choices are correct Decisions to install new equipment, purchase other businesses, and purchase a new building are examples of a capital investment analysis b incremental analysis c absorption costing analysis d direct costing decisions The interest rate used in net present value analysis is referred to as the a rate of return on investments b internal rate of return c present value of an annuity d hurdle rate The expected average rate of return for a proposed investment of $625,000 in a fixed asset, with a useful life of 4 years, straight line depreciation, no residual value, and an expected total net income of $250,000 for the 5 years, is which of the following a 16 b 50 c 40 d 18

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Please choose the best letter for each question 1-8 Average rate of return is calculated by using which of the following formulas? a.Estimated Average Annual

Please choose the best letter for each question 1-8

Average rate of return is calculated by using which of the following formulas?

a.Estimated Average Annual Income Average Investment

b.Average Investment Residual Value

c.(Initial Cost + Residual Value) 2

d.Estimated Average Annual Income Residual Value

Capital investment evaluation methods can be grouped into which of the following two general categories?

a.Methods that do not use present values and methods that use present values

b.Methods that do not use variable costing and methods that use variable costing

c.Methods that use absorption costing analysis and methods that use incremental analysis

d.Methods that use average rate of return and methods that use differential analysis

All of the following are disadvantages of using the average rate of return except

a.the average rate of return method does not use present values.

b.the average rate of return method does not consider the timing of the expected cash flows.

c.the average rate of return method includes the entire amount of income earned over the life of the proposal.

d.the average rate of return method does not directly consider the expected cash flows from the proposal.

The following table is for the present value of $1 at compound interest.

Year	6%	10%	12%
1	0.943	0.909	0.893
2	0.890	0.826	0.797
3	0.840	0.751	0.712
4	0.792	0.683	0.636
5	0.747	0.621	0.567

The following table is for the present value of an annuity of $1 at compound interest.

Year	6%	10%	12%
1	0.943	0.909	0.893
2	1.833	1.736	1.690
3	2.673	2.487	2.402
4	3.465	3.170	3.037
5	4.212	3.791	3.605

Using these tables, what would be the present value of $15,000 (rounded to the nearest dollar) to be received 3 years from today, assuming an earnings rate of 6%?

a.$14,145

b.$40,095

c.$12,600

d.$13,350

An advantage of the internal rate of return method is that

a.it considers the cash flows of the investment.

b.it considers the time value of money.

c.it can rank proposals of equal lives.

d.All of these choices are correct.

Decisions to install new equipment, purchase other businesses, and purchase a new building are examples of

a.capital investment analysis.

b.incremental analysis.

c.absorption costing analysis.

d.direct costing decisions.

The interest rate used in net present value analysis is referred to as the

a.rate of return on investments.

b.internal rate of return.

c.present value of an annuity.

d.hurdle rate.

The expected average rate of return for a proposed investment of $625,000 in a fixed asset, with a useful life of 4 years, straight-line depreciation, no residual value, and an expected total net income of $250,000 for the 5 years, is which of the following?

a.16%

b.50%

c.40%

d.18%