Question : 31) The capital budgeting stage in which the project placed in : 1196184

 

31)

The capital budgeting stage in which the project is placed in motion and performance is monitored is called the 31)

______ A)

implementation and control stage. B)

financing stage. C)

selection stage. D)

information-acquisition stage. E)

none of the above

32)

The return that is expected by the organization is known as all of the following EXCEPT 32)

______ A)

cost of capital. B)

required rate of return. C)

hurdle rate. D)

discount rate. E)

profit rate.

33)

Hawkeye Cleaners has been considering the purchase of an industrial dry-cleaning machine. The existing machine is operable for three more years and will have a zero disposal price. If the machine is disposed of now, it may be sold for $60,000. The new machine will cost $200,000, an additional cash investment in working capital of $60,000 will be required. The new machine will reduce the average amount of time required to wash clothing and will decrease labour costs. The investment is expected to net $50,000 in additional cash inflows during the year of acquisition and $150,000 each additional year of use. These cash flows will generally occur throughout the year and are recognized at the end of each year. Income taxes are not considered in this problem.

What is the net present value of the investment assuming the required rate of return is 10 percent? Would the company want to purchase the new machine? 33)

______ A)

$(82,000); no B)

$50,000; no C)

$82,000; yes D)

$(50,000); yes E)

$110,000; yes

34)

Hawkeye Cleaners has been considering the purchase of an industrial dry-cleaning machine. The existing machine is operable for three more years and will have a zero disposal price. If the machine is disposed of now, it may be sold for $60,000. The new machine will cost $200,000, an additional cash investment in working capital of $60,000 will be required. The new machine will reduce the average amount of time required to wash clothing and will decrease labour costs. The investment is expected to net $50,000 in additional cash inflows during the year of acquisition and $150,000 each additional year of use. These cash flows will generally occur throughout the year and are recognized at the end of each year. Income taxes are not considered in this problem.

What is the net present value of the investment assuming the required rate of return is 24 percent? Would the company want to purchase the new machine? 34)

______ A)

$49,200; no B)

$(16,400); no C)

$32,800; no D)

$(32,800); yes E)

$16,400; yes

35)

Shirt Company wants to purchase a new cutting machine for its sewing plant. The investment is expected to generate annual cash inflows of $300,000. The required rate of return is 12 percent and the current machine is expected to last for 4 years. What is the maximum dollar amount Shirt Company would be willing to spend for the machine assuming its life is also four years? 35)

______ A)

$957,600 B)

$791,740 C)

$911,400 D)

$720,600 E)

$507,000

36)

When all future cash inflows and outflows are discounted to the present using the required rate of return, the method used is 36)

______ A)

net present value. B)

discounted cash flow. C)

payback method. D)

required rate of return. E)

capital budgeting.

37)

When the net present value method is used, only projects with ________ are ________. 37)

______ A)

positive net future value; acceptable B)

negative net present value; acceptable C)

negative net future value; not acceptable D)

positive net present value; acceptable E)

positive net value; no acceptable

38)

Which of the following statements about the net present value method is FALSE? 38)

______ A)

Acceptable projects are those where the return exceeds the cost of capital. B)

The origination of cash flows is not important in the analysis. C)

It focuses only on cash inflows. D)

Projects with positive net present values are acceptable. E)

Projects with higher net present values are preferred when all other factors are equal.

39)

Which of the following results of net present value analyses is the LEAST acceptable? 39)

______ A)

$20,000 B)

$(15,000) C)

$12,000 D)

$0 E)

$(1,000)

40)

If the net present value analyses of a project resulted in a positive value and the company does not accept the project, it may be assumed that 40)

______ A)

qualitative factors outweigh the benefit of the investment. B)

quantitative factors outweigh the benefit of the investment. C)

the net initial investment cannot be recovered. D)

the return is greater than that required by the company. E)

An alternative project has a lower NPV.