Question : 51. Barney’s Bagels invested in a new oven for $12,000. The : 1208027

51. Barney’s Bagels invested in a new oven for $12,000. The oven reduced the amount of time for baking which increased production and sales for five years by the following amounts of cash inflows:
  
Using the averaging method, the payback period for the investment in the oven would be: 
A. 5.0 years.
B. 2.4 years.
C. 2.0 years.
D. 1.7 years.

52. Which of the following statements concerning payback analysis is true? 
A. An investment with a longer payback is preferable to an investment with a shorter payback.
B. The payback method ignores the time value of money concept.
C. The payback method and the unadjusted rate of return are different approaches that will consistently lead to the same conclusion.
D. All of the other answers are correct.

53. Which of the following does not represent an advantage of the unadjusted rate of return over the payback method for evaluating capital projects? 
A. The unadjusted rate of return method considers the investment’s profitability.
B. The unadjusted rate of return method measures the recovery of the initial investment in the project.
C. The unadjusted rate of return is a percentage that can be compared to a stated hurdle rate.
D. All of the other answers are correct.

54. Cash outflows generated by capital investments include all of the following except: 
A. Purchase discounts
B. Transportation costs
C. Increased operating expenses
D. Increases in the amount of working capital

55. Arthur Company is considering a capital project that will return $100,000 each year for five years. At the company’s hurdle rate of 10%, the present value of the annuity is $379,078. What will be the company’s return on investment in Year 1? 
A. $37,908
B. $62,092
C. $100,000
D. None of the other answers are correct.

56. Which capital budgeting technique defines returns in terms of income instead of cash flows? 
A. The unadjusted rate of return method
B. The internal rate of return technique
C. The net present value technique
D. The payback period

57. Eddy Company has an opportunity to purchase an asset that will cost the company $25,000. The asset is expected to add $7,500 per year to the company’s net income. Assuming the asset has a five-year useful life and zero salvage value, the unadjusted rate of return based on the average investment will be: 
A. 60%.
B. 30%.
C. 15%.
D. None of the other answers are correct.

58. Finebaum Company plans to invest in a new operating plant that is expected to cost $600,000. The projected incremental income from the investment is as follows:
  
The unadjusted rate of return on the initial investment would be approximately: 
A. 5.0%.
B. 6.7%.
C. 13.3%.
D. 15.0%.

59. Select the incorrect statement regarding postaudits of capital investment decisions. 
A. A postaudit should be conducted at the end of the project.
B. The postaudit helps management determine whether a project that had been accepted should have been rejected.
C. A postaudit is not necessary for a capital investment selected using a technique that considers the time value of money.
D. The goal of a postaudit is to provide feedback that can be used to improve the accuracy of future capital investment decisions.

60. The purposes of the postaudit for capital investments include all of the following except: 
A. Continuous improvement.
B. Punishment for poor capital investment decisions.
C. Determining whether the project generated the results expected.
D. Ensuring that managers closely scrutinize capital investment decisions.