Question 1: Which of the following would be a period cost for a company that grows plants and flowers.

A. seed

B. Heat for greenhouse

C. Depreciation for headquarters building

D. Plant containers

Question 2: Blueberry Hill Pie Company evaluated several capital budgeting techniques used in the decision to purchase another plant. The payback period was 3 years, the ARR was 15% and its hurdle rate was 10%. The Net Present value (NPV) was positive at $1,500, the IRR was 18% and the profitability index was 2.0. Based on these results, the company should

A. Ignore the investment

B. Accept the invesment

C. Wait 5 more years before making an investment decision

D. Not enough information for making an investment decision

Question 3: Hurdle rate is defined as managements minimum desired rate of return on an investment; also called the discount rate and required rate of return. Assume that Ernest Corporation has a required hurdle rate of 14% for all new investments. What does this hurdle rate mean?

A. All potential investments with an IRR less than 14% will be accepted.

B. All potential investments with an IRR of 14% or higher will be accepted.

C. If a potential investment has an IRR of 14% or higher, it will not be considered.

D. If a potential investment has an IRR less than 14%, it will be analyzed further.