Question :
46. Which of the following not an important financial consideration in : 1229659
46. Which of the following is not an important financial consideration in capital budgeting?
A. The timing of the investment’s future cash flows.
B. The investment’s future profitability.
C. The sunk costs related to the investment.
D. The initial cost of the investment and its estimated salvage value.
47. When using the net present value method for evaluating an investment, an increase in the required rate of return will:
A. Make it more difficult to accept the investment.
B. Make it less difficult to accept the investment.
C. Not affect the decision if the length of the investment’s benefits remain constant.
D. Not be a consideration because it is not used in the net present value method.
48. An investment’s annual net cash flow will always be equal to its:
A. Annual revenue less its annual expenses.
B. Annual cash receipts less its annual cash disbursements.
C. Annual revenue less its annual cash disbursements.
D. Annual net income plus its annual depreciation expense.
49. If all revenue generated by an investment is immediately received in cash, and all of the investment’s expenses (other than depreciation) are immediately paid in cash, annual net cash flow of the investment may be determined by:
A. Subtracting the investment’s annual depreciation expense from the annual net income earned by the investment.
B. Adding the investment’s annual depreciation expense to the annual net income earned by the investment.
C. Subtracting the investment’s annual expenses from the annual revenue it generates.
D. Adding the investment’s annual depreciation expense to the annual revenue generated by the investment.
50. Which of the following is generally not considered a capital budgeting technique?
A. Payback period.
B. Return on average investment.
C. Return on stockholders’ equity.
D. Discounting of future cash flows.
51. The payback period:
A. Is the length of time necessary to recover the entire cost of an investment from its resulting annual net cash flow.
B. Is the length of time necessary to recover the entire cost of an investment from its resulting annual net income.
C. Takes into consideration the profitability of an investment over its entire life, but ignores the timing of its future cash flows.
D. Takes into consideration both the profitability of an investment over its entire life and the timing of its future cash flows.
52. Which of the following factors does the payback method does NOT ignore?
A. Total profitability of an investment.
B. The cash flows over the entire life of an investment.
C. The timing of cash flows.
D. The initial investment.
53. In computing the return on average investment of a particular asset, the asset’s annual depreciation expense may be viewed as:
A. An increase in the average amount invested over the life of the asset.
B. An increase in the asset’s carrying value each year.
C. A recovery of the amount originally invested in the asset.
D. A decrease in the asset’s net cash flows.
54. The average carrying value (or average investment) of an asset with no salvage value is equal to:
A. The original cost of the asset divided by its estimated useful life.
B. The original cost of the asset divided by two.
C. The average annual net cash flow of the asset multiplied by the asset’s estimated useful life.
D. The average annual net income of the asset multiplied by the asset’s estimated useful life.
55. A cost that has been incurred irrevocably by past actions is a (an):
A. Capital expenditure.
B. Incremental cost.
C. Sunk cost.
D. Fixed cost.
