Question 1// What is the first step of capital budgeting?O A. Gather the money for the investment.O B. Develop long-term goals.O c. Identify potential projects.O D. Get the accountant involved.Question 2// The potential benefits of one alternative that a given up by choosing another alternative is knows as a(n):O A. differential costO B. opportunity costO c. alternatiave costO D. sunk costQuestion 3// company paid $200,000 eight years ago for a specialized machine that has no salvage value and is being depreciated at the rate of $20,000 per yearThe company is considering using this machine in a new project that will have incremental revenues of $35,000 per year and annual cash costs of $17,000. In analyzing the new project, the $200,000 cost of the old machine is an example of a(n)O A. incremental cost? B. opportunity costO c. sunk costO D. out-of-pocket costQuestion 4// What is the process of planning to invest in long-term assets in a way that returns the highest profitability?O A. Capital rationingO B. Capital invesmentO C. Capital budgetingO D. Capital post-auditQuestion 5// If an asset cos $420,000 and is expected to have a $60,000 salvage (residual) value at the end of its ten-year life, and generates annual net cash inflows of $60,000 each year, the cash payback period is0 1O A. 6 yearsO B. 8 yearsO c. 5 years? D. 7 yearsQuestion 6// Green Retailers has a current return on investment of 10% and the company has established an 8% minimum rate of return for the divisionThe division manager has two investment projects available, for which the following estimates have been made:Project A - Annual operating income = $24,000, operating assets = $400,000Project B - Annual operating income = $60,000, operating assets = $550,000Which project should be funded?? A. Neither ProjectO B. Project BO C. Both projectsO D. ProjectAQuestion 7// Green's Construction Corp. is considering investing in warehouse-management software that costs $550,000, has $75,000 residual value, and should lead to cost savings of $130,000 per year for its five-year life.What is the accounting rate of return?? A. 54.7%? B. 11.2%O C. 20.8%O D. D. 27.4%Question 8//Which of the following affects the present value of an investment?O A. The interest rateO B. The number of time periods (length of the investment)O C. The type of investment (annuity versus single lump sum)O D. All of the aboveQuestion 9// Your favorite uncle has promised to give you $2,500 per year and the end of each of the next four years to help you pay for a new car. Using an annual interest rate of 10%, interest is compounded (calculated) 1 per year, the present value of the gift can be statedO A. PV = $2,500 x 10% 4O B. PV = $2,500 (Annuity factor, i=10%, n=4)O c. PV = $2,500 (PV factor, i=10%, n=10)O D. PV = $2,500 (Annuity factor, i=4%, n=10)

The management of Green Company is considering to purchase an equipment to be attached with the main manufacturing machine. PRESENT VALUE TAB The equipment will cost $75,000 and will increase annual cash-inflows by $22,000. The useful life of the equipment is 6 years. After 6 years it will have $10,000 salvage value. Present value of one dollar The management wants a 10% return on all investments. Period 1% 2% 3% 4% 5% 6% 0.990 0.980 Compute net present value (NPV) of this investment project. 0.971 0.962 0.952 0.943 0.980 0.961 0.943 0.925 0.907 0.890 NOTE: PRESENT VALUE TABLES ARE POSTED ON THE RIGHT. SLIDE OVER or UP/DOWN TO C A W N - 0.971 0.942 0.915 0.889 0.864 0.840 VIEW TABLE VALUES. 0.961 0.924 0.888 0.855 0.823 0.792 0.951 0.906 0.863 0.822 O A. $75,000 0.784 0.747 0.942 0.888 0.837 0.790 0.746 0.705 NO B. $3,384 0.933 0.871 0.813 0.760 0.711 0.665 O C. 26,457 0.923 0.853 0.789 0.731 0.677 0.627 0.914 0.837 0.766 0.703 0.645 0.592 O D. $99,810 0.905 0.820 0.744 0.676 0.614 0.558 Table of Present Value Annuit Number of periods Interest r 1% 2% 3% 4% 5% 0.9901 0.9804 0.9709 0.9615 0.9524 1.9704 1.9416 1.9135 1.8861 1.8594 2.941 2.8839 2.8286 2.7751 2.7232 VOUAW NH 3.902 3.8077 3.7171 3.6299 3.546 4.8534 4.7135 4.5797 4.4518 4.3295 5.7955 5.6014 5.4172 5.2421 5.0757 6 475