Question :
61. The review of a capital budgeting decision to determine whether : 1208002
61. The review of a capital budgeting decision to determine whether a project was accepted that should have been rejected is referred to as:
A. An audit.
B. A preaudit.
C. A postaudit.
D. A capital review.
62. Six years ago, Torrence Hardware paid a contractor $45,000 to expand the store. At that time, the company calculated a net present value of about $6,000 for the expansion. Now, the company believes that the investment increased annual cash inflows by $8,000 per year for each of the six years. Torrence has a desired rate of return of 10%. What was the net present value actually achieved for this capital investment? (round to the nearest dollar)
A. ($10,158)
B. ($3,000)
C. $34,842
D. $(9,207)
63. Lane Company is considering purchasing a capital investment that is expected to provide annual cash inflows of $10,000 per year for 3 years. Assuming that Lane’s required rate of return is 8%, what is the present value of these cash inflows?
A. $25,771
B. $24,869
C. $33,121
D. $24,018
64. Phoenix Company is considering purchasing a capital investment that is expected to provide annual cash inflows of $15,000 per year for 3 years. Assuming that the required rate of return is 10%, what is the present value of these cash inflows?
A. $38,656
B. $37,303
C. $36,027
D. 23,665
65. Santa Fe Company is considering the purchase of equipment that would cost $40,000 and offer annual cash inflows of $10,500 over its useful life of 5 years. Assuming a required rate of return of 8%, what is the net present value of this investment opportunity?
A. $(1,923)
B. $40,000
C. $1,923
D. $41,923
66. George Company is considering the purchase of equipment that would cost $40,000 and offer annual cash inflows of $10,500 over its useful life of 5 years. Assuming a desired rate of return of 10%, is the project acceptable?
A. No, since the negative net present value indicates the investment will yield a rate of return below the desired rate of return.
B. Yes, since the positive net present value indicates the investment will earn a rate of return lower than the desired rate of return.
C. C. Yes, since the positive net present value indicates the investment will earn a rate of return in excess of 10%.
D. The answer cannot be determined.
67. Crown Company is considering purchase of equipment that costs $60,000. If the useful life is expected to be 5 years and Crown’s required rate of return is 10%, what is the minimum annual cash inflow that the equipment must offer for the investment to be acceptable?
A. $15,027
B. $15,828
C. $16,644
D. $18,928
68. Graves Company is considering purchase of equipment that costs $60,000 and is expected to offer annual cash inflows of $19,000. Graves’ minimum required rate of return is 10%. How many years must the cash flows last, for the investment to be acceptable? (Round to nearest whole year.)
A. 1
B. 2
C. 3
D. 4
69. Forrest Company is considering purchase of equipment that costs $60,000 and is expected to offer annual cash inflows of $17,000 for 5 years. Forrest Company’s required rate of return is 10%. What is the internal rate of return of this investment project?
A. 13.79%
B. 5.2%
C. 17.65%
D. 12.86%
70. Bern Corporation is considering an investment in equipment that would cost $50,000 and provide annual cash inflows of $14,000. The company’s required rate of return is 12%; the internal rate of return for the investment is 10.5%. Should the company make this investment?
A. Yes, since the internal rate of return is more than the company’s required rate of return.
B. Yes, since the internal rate of return is less than the company’s required rate of return.
C. No, since the internal rate of return is less than the company’s required rate of return.
D. The answer cannot be determined.
