Question 1 If a project costing $80,000 has a profitability index of 1 00 and the discount rate was 12 , then the present value of the net cash flows was $80,000 less than $80,000 greater than $80,000 undeterminable Garza Company is considering buying equipment for $320,000 with a useful life of five years and an estimated salvage value of $16,000 If annual expected income is $28,000, the denominator in computing the annual rate of return is $160,000 $320,000 $336,000 $168,000 Question 3 If a project's profitability index is greater than 1, then the project should always be accepted project should be accepted if funds are available project's net present value is negative project's internal rate of return is less than the discount rate Question 4 An approach that uses a number of outcome estimates to get a sense of the variability among potential returns is risk analysis sensitivity analysis the net present value method the discounted cash flow technique Question 5 The discount rate is referred to by all of the following alternative names except the accounting rate of return hurdle rate required rate of return cutoff rate Question 6 The capital budgeting method that takes into account both the size of the original investment and the discounted cash flows is the internal rate of return method net present value method profitability index cash payback method Question 7 Cleaners, Inc is considering purchasing equipment costing $60,000 with a 6 year useful life The equipment will provide cost savings of $14,600 and will be depreciated straight line over its useful life with no salvage value Cleaners requires a 10 rate of return Present Value of an Annuity of 1 Period 8 9 10 11 12 15 6 4 623 4 486 4 355 4 231 4 111 3 784 What is the approximate profitability index associated with this equipment 1 06 1 03 73 1 23 Question 8 The internal rate of return factor is also the cash payback period annual rate of return profitability index present value factor for a single amount Question 9 If a company's required rate of return is 9 , and in using the profitability index method, a project's index is greater than 1, this indicates that the project's rate of return is equal to 9 less than 9 greater than 9 unacceptable for investment purposes Question 10 All of the following statements about the internal rate of return method are correct except that it is widely used in practice is easy to interpret recognizes the time value of money can be used only when the cash inflows are equal Question 11 Which of the following ignores the time value of money Cash payback Internal rate of return Profitability index Net present value Question 12 Bark Company is considering buying a machine for $240,000 with an estimated life of ten years and no salvage value The straight line method of depreciation will be used The machine is expected to generate net income of $6,000 each year The cash payback period on this investment is 10 years 4 years 8 years 20 years Question 13 The discount rate that will result in the lowest net present value for a project is the highest rate used to evaluate the project the lowest rate used to evaluate the project any rate lower that the cost of capital any rate higher than the cost of capital Question 14 Performing a post audit is important because all of these it provides a formal mechanism by which the company can determine whether existing projects should be terminated managers will be more likely to submit reasonable data when they make investment proposals if they know their estimates will be compared to actual results it improves the development of future investment proposals because managers improve their estimation techniques by evaluating their past successes and failures Question 15 A disadvantage of the cash payback technique is that it ignores obsolescence factors is complicated to use ignores the cost of an investment ignores the time value of money Question 1 If a project costing $80,000 has a profitability index of 1 00 and the discount rate was 12 , then the present value of the net cash flows was $80,000 less than $80,000 greater than $80,000 undeterminable Garza Company is considering buying equipment for $320,000 with a useful life of five years and an estimated salvage value of $16,000 If annual expected income is $28,000, the denominator in computing the annual rate of return is $160,000 $320,000 $336,000 $168,000 Question 3 If a project's profitability index is greater than 1, then the project should always be accepted project should be accepted if funds are available project's net present value is negative project's internal rate of return is less than the discount rate Question 4 An approach that uses a number of outcome estimates to get a sense of the variability among potential returns is risk analysis sensitivity analysis the net present value method the discounted cash flow technique Question 5 The discount rate is referred to by all of the following alternative names except the accounting rate of return hurdle rate required rate of return cutoff rate Question 6 The capital budgeting method that takes into account both the size of the original investment and the discounted cash flows is the internal rate of return method net present value method profitability index cash payback method Question 7 Cleaners, Inc is considering purchasing equipment costing $60,000 with a 6year useful life The equipment will provide cost savings of $14,600 and will be depreciated straightline over its useful life with no salvage value Cleaners requires a 10 rate of return Present Value of an Annuity of 1 Period 8 9 10 11 12 15 6 4 623 4 486 4 355 4 231 4 111 3 784 What is the approximate profitability index associated with this equipment 1 06 1 03 73 1 23 Question 8 The internal rate of return factor is also the cash payback period annual rate of return profitability index present value factor for a single amount Question 9 If a company's required rate of return is 9 , and in using the profitability index method, a project's index is greater than 1, this indicates that the project's rate of return is equal to 9 less than 9 greater than 9 unacceptable for investment purposes Question 10 All of the following statements about the internal rate of return method are correct except that it is widely used in practice is easy to interpret recognizes the time value of money can be used only when the cash inflows are equal Question 11 Which of the following ignores the time value of money Cash payback Internal rate of return Profitability index Net present value Question 12 Bark Company is considering buying a machine for $240,000 with an estimated life of ten years and no salvage value The straightline method of depreciation will be used The machine is expected to generate net income of $6,000 each year The cash payback period on this investment is 10 years 4 years 8 years 20 years Question 13 The discount rate that will result in the lowest net present value for a project is the highest rate used to evaluate the project the lowest rate used to evaluate the project any rate lower that the cost of capital any rate higher than the cost of capital Question 14 Performing a postaudit is important because all of these it provides a formal mechanism by which the company can determine whether existing projects should be terminated managers will be more likely to submit reasonable data when they make investment proposals if they know their estimates will be compared to actual results it improves the development of future investment proposals because managers improve their estimation techniques by evaluating their past successes and failures Question 15 A disadvantage of the cash payback technique is that it ignores obsolescence factors is complicated to use ignores the cost of an investment ignores the time value of money

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Question 1 If a project costing $80,000 has a profitability index of 1.00 and the discount rate was 12%, then the present value of the

Question 1 If a project costing $80,000 has a profitability index of 1.00 and the discount rate was 12%, then the present value of the net cash flows was $80,000. less than $80,000. greater than $80,000. undeterminable Garza Company is considering buying equipment for $320,000 with a useful life of five years and an estimated salvage value of $16,000. If annual expected income is $28,000, the denominator in computing the annual rate of return is $160,000. $320,000. $336,000. $168,000. Question 3 If a project's profitability index is greater than 1, then the project should always be accepted. project should be accepted if funds are available. project's net present value is negative. project's internal rate of return is less than the discount rate. Question 4 An approach that uses a number of outcome estimates to get a sense of the variability among potential returns is risk analysis. sensitivity analysis. the net present value method. the discounted cash flow technique. Question 5 The discount rate is referred to by all of the following alternative names except the accounting rate of return. hurdle rate. required rate of return. cutoff rate. Question 6 The capital budgeting method that takes into account both the size of the original investment and the discounted cash flows is the internal rate of return method. net present value method. profitability index. cash payback method. Question 7 Cleaners, Inc. is considering purchasing equipment costing $60,000 with a 6-year useful life. The equipment will provide cost savings of $14,600 and will be depreciated straight-line over its useful life with no salvage value. Cleaners requires a 10% rate of return. Present Value of an Annuity of 1 Period 8% 9% 10% 11% 12% 15% 6 4.623 4.486 4.355 4.231 4.111 3.784 What is the approximate profitability index associated with this equipment? 1.06 1.03 .73 1.23 Question 8 The internal rate of return factor is also the cash payback period. annual rate of return. profitability index. present value factor for a single amount Question 9 If a company's required rate of return is 9%, and in using the profitability index method, a project's index is greater than 1, this indicates that the project's rate of return is equal to 9%. less than 9%. greater than 9%. unacceptable for investment purposes. Question 10 All of the following statements about the internal rate of return method are correct except that it is widely used in practice. is easy to interpret. recognizes the time value of money. can be used only when the cash inflows are equal Question 11 Which of the following ignores the time value of money? Cash payback Internal rate of return Profitability index Net present value Question 12 Bark Company is considering buying a machine for $240,000 with an estimated life of ten years and no salvage value. The straight-line method of depreciation will be used. The machine is expected to generate net income of $6,000 each year. The cash payback period on this investment is 10 years. 4 years. 8 years. 20 years. Question 13 The discount rate that will result in the lowest net present value for a project is the highest rate used to evaluate the project. the lowest rate used to evaluate the project. any rate lower that the cost of capital. any rate higher than the cost of capital. Question 14 Performing a post-audit is important because all of these. it provides a formal mechanism by which the company can determine whether existing projects should be terminated. managers will be more likely to submit reasonable data when they make investment proposals if they know their estimates will be compared to actual results. it improves the development of future investment proposals because managers improve their estimation techniques by evaluating their past successes and failures Question 15 A disadvantage of the cash payback technique is that it ignores obsolescence factors. is complicated to use. ignores the cost of an investment. ignores the time value of money. image text in transcribed

Question 1 If a project costing $80,000 has a profitability index of 1.00 and the discount rate was 12%, then the present value of the net cash flows was $80,000. less than $80,000. greater than $80,000. undeterminable Garza Company is considering buying equipment for $320,000 with a useful life of five years and an estimated salvage value of $16,000. If annual expected income is $28,000, the denominator in computing the annual rate of return is $160,000. $320,000. $336,000. $168,000. Question 3 If a project's profitability index is greater than 1, then the project should always be accepted. project should be accepted if funds are available. project's net present value is negative. project's internal rate of return is less than the discount rate. Question 4 An approach that uses a number of outcome estimates to get a sense of the variability among potential returns is risk analysis. sensitivity analysis. the net present value method. the discounted cash flow technique. Question 5 The discount rate is referred to by all of the following alternative names except the accounting rate of return. hurdle rate. required rate of return. cutoff rate. Question 6 The capital budgeting method that takes into account both the size of the original investment and the discounted cash flows is the internal rate of return method. net present value method. profitability index. cash payback method. Question 7 Cleaners, Inc. is considering purchasing equipment costing $60,000 with a 6year useful life. The equipment will provide cost savings of $14,600 and will be depreciated straightline over its useful life with no salvage value. Cleaners requires a 10% rate of return. Present Value of an Annuity of 1 Period 8% 9% 10% 11% 12% 15% 6 4.623 4.486 4.355 4.231 4.111 3.784 What is the approximate profitability index associated with this equipment? 1.06 1.03 .73 1.23 Question 8 The internal rate of return factor is also the cash payback period. annual rate of return. profitability index. present value factor for a single amount Question 9 If a company's required rate of return is 9%, and in using the profitability index method, a project's index is greater than 1, this indicates that the project's rate of return is equal to 9%. less than 9%. greater than 9%. unacceptable for investment purposes. Question 10 All of the following statements about the internal rate of return method are correct except that it is widely used in practice. is easy to interpret. recognizes the time value of money. can be used only when the cash inflows are equal Question 11 Which of the following ignores the time value of money? Cash payback Internal rate of return Profitability index Net present value Question 12 Bark Company is considering buying a machine for $240,000 with an estimated life of ten years and no salvage value. The straightline method of depreciation will be used. The machine is expected to generate net income of $6,000 each year. The cash payback period on this investment is 10 years. 4 years. 8 years. 20 years. Question 13 The discount rate that will result in the lowest net present value for a project is the highest rate used to evaluate the project. the lowest rate used to evaluate the project. any rate lower that the cost of capital. any rate higher than the cost of capital. Question 14 Performing a postaudit is important because all of these. it provides a formal mechanism by which the company can determine whether existing projects should be terminated. managers will be more likely to submit reasonable data when they make investment proposals if they know their estimates will be compared to actual results. it improves the development of future investment proposals because managers improve their estimation techniques by evaluating their past successes and failures Question 15 A disadvantage of the cash payback technique is that it ignores obsolescence factors. is complicated to use. ignores the cost of an investment. ignores the time value of money