Various parts of the organization that are involved in capital investment analysis include all of the following except

	a.	financial analysts
	b.	marketing specialists
	c.	creditors
	d.	managers

Question 2

Qualitative factors that are considered by decision makers include all of the following except

	a.	impact on other company operations .
	b.	revenue from fees
	c.	anticipated future technological improvements
	d.	competition

Question 3

The components of cost of capital include all of the following except

	a.	the cost of debt
	b.	the cost of preferred stock
	c.	the cost of common stock and retained earnings
	d.	the minimum rate of return

Question 4

The financing structure of Taylor communications is as follows:

Source of Capital	Proportion of Capital	Cost of Capital
Debt financing, $300,000	30%	6%
Preferred stock, $100,000	10%	8%
Common stock, $400,000	40%	12%
Retained earnings, $200,000	20%	12%

The weighted cost of debt is

	a.	2.4%
	b.	4.8%
	c.	.8%
	d.	1.8%

Question 5

The financing structure of Taylor communications is as follows:

Source of Capital	Proportion of Capital	Cost of Capital
Debt financing, $300,000	30%	6%
Preferred stock, $100,000	10%	8%
Common stock, $400,000	40%	12%
Retained earnings, $200,000	20%	12%

The weighted cost of preferred stock is

	a.	.8%
	b.	4.8%
	c.	2.4%
	d.	9.8%

Question 6

Smile Industries capital structure consists of $1,000,000 of debt at 6 percent interest and 1,500,000 of stockholders equity at 2 percent.

The proportion of Debt in the total capital structure is

	a.	10%
	b.	15%
	c.	40%
	d.	100%

Question 7

Decisions to install new equipment, replace old equipment, and purchase or construct a new building are examples of

	a.	capital investment decisions.
	b.	incremental analysis.
	c.	sales mix analysis.
	d.	direct costing decisions.

Question 8

Depreciation expense influences cash flows because it directly affects

	a.	the amount of income taxes paid by the company.
	b.	cash received from revenues during the current period.
	c.	the carrying value of the asset.
	d.	accumulated depreciation.

Question 9

What role do marketing specialists play in capital investment analysis?

	a.	They predict sales trends and new product demands.
	b.	They provide estimates as to how much money can be spent on capital facilities.
	c.	They supply a target cost of capital.
	d.	They designate the desired rate of return.

Question 10

A company is considering a project with annual after-tax cash flows of $5,700.00 per year for six years. The company's cost of capital is 14 percent. Present and future value factors for a 14 percent interest rate for six years are as follows:

Future value of $1	2.195
Present value of $1	0.456
Future value of a series of equal payments	8.536
Present value of a series of equal payments	3.889

Using the net present value method, what is the maximum amount that the company should invest?

	a.	$22,167.30
	b.	$48,655.20
	c.	$12,511.50
	d.	$2,599.20