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Question : 81. A company bought a machine that has an expected : 1256771

Accounting

 

 

81. A company bought a machine that has an expected life of six years and no salvage value. Management estimates that this machine will generate annual after-tax net income of $700. If the accounting rate of return is 10%, what was the purchase price of the machine?A.  $7,000B.  $700C.  $28,000D.  $14,000E.  $3,500

 

 

 

 

 

 

 

 

82. Which of the following cash flows is not considered when using the net present value method?A.  Future cash inflows.B.  Future cash outflows.C.  Past cash outflows.D.  Nonuniform cash inflows.E.  Cash inflow from the sale of the asset.

 

 

83. An estimate of an asset’s value to the company, calculated by discounting the future cash flows from the investment at an appropriate rate and then subtracting the initial cost of the investment, is known as:A.  Annual net cash flows.B.  Rate of return on investment.C.  Net present value.D.  Payback period.E.  Unamortized carrying value.

 

 

84. Which one of the following methods considers the time value of money in evaluating alternative capital expenditures?A.  Accounting rate of return.B.  Net present value.C.  Payback period.D.  Cash flow method.E.  Return on average investment.

 

 

85. Daniels Corporation is considering the purchase of new equipment costing $30,000. The projected annual after-tax net income from the equipment is $1,200, after deducting $10,000 for depreciation. The revenue is to be received at the end of each year. The machine has a useful life of three years and no salvage value. Daniels requires a 12% return on its investments. The factors for the present value of $1 for different periods follow: 

Periods

12 Percent

1

0.8929

2

0.7972

3

0.7118

4

0.6355

What is the net present value of the machine?A. $24,018B. $(3,100)C. $30,000D. $26,900E. $(29,520)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

86. Peng Corporation is considering the purchase of new equipment costing $30,000. The projected annual after-tax net income from the equipment is $1,200, after deducting $10,000 for depreciation. The revenue is to be received at the end of each year. The machine has a useful life of four years and no salvage value. Peng requires a 12% return on its investments. The factors for the present value of $1 for different periods follow: 

Periods

12 Percent

1

0.8929

2

0.7972

3

0.7118

4

0.6355

Calculate the break-even time for this equipment. A.  Break-even time is longer than four years.B.  Break-even time is between three and four years.C.  Break-even time is between two and three years.D.  Break-even time is between one and two years.E.  This project will never break even.

 

 

 

 

 

 

 

 

 

 

 

 

87. Scott Corporation is considering the purchase of new equipment costing $30,000. The projected annual after-tax net income from the equipment is $1,200, after deducting $10,000 for depreciation. The revenue is to be received at the end of each year. The machine has a useful life of three years and a $4,000 salvage value. Scott requires a 12% return on its investments. The factors for the present value of $1 for different periods follow: 

Periods

12 Percent

1

0.8929

2

0.7972

3

0.7118

4

0.6355

What is the net present value of the machine and what is the maximum Scott would have been willing to pay for it?A. $(251.52) but Scott would not pay any amount to acquire the machine because the NPV is negative. B. $(251.52) and Scott would be willing to pay $29,748.48 for the machine.C. $(251.52) but the price Scott would pay cannot be determined.

D. $900 and Scott would be willing to pay $30,900 to acquire the machine E. $900 but Scott would not be willing to acquire the machine.  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

88. The following present value factors are provided for use in this problem: 

 

Present Value

 

Present Value of an

Periods

of 1 at 8%

Annuity of 1 at 8%

1

0.9259

0.9259

2

0.8573

1.7833

3

0.7938

2.5771

4

0.7350

3.3121

Norman Co. wants to purchase a machine for $40,000 but needs to earn an 8% return. The expected year-end net cash flows are $12,000 in each of the first three years and $16,000 in the fourth year. What is the machine’s net present value (rounded to the nearest whole dollar)?A.  $(9,075)B.  $2,685C.  $42,685D.  $(28,240)E.  $52,000

 

 

89. A company is considering the purchase of new equipment costing $91,000. The machine has a useful life of four years and no salvage value. The company requires a 12% return on its investments. The factors for the present value of an annuity of 1 for different periods follow: 

Periods

12 Percent

1

0.8929

2

1.6901

3

2.4018

4

3.0373

Assuming all revenue is to be received at the end of each year, what are the net cash flows for this investment if net present value equals ($11,790)?A.  $78,210B.  $10,920C.  $25,750D.  $237,547E.  $33,513

 

 

90. Saxon Manufacturing is considering purchasing two machines. Each machine costs $9,000 and will produce cash flows as follows: 

End of

Machine

Year

A

B

1

$5,000

$1,000

2

4,000

2,000

3

2,000

11,000

Saxon Manufacturing uses the net present value method to make the decision, and it requires a 15% annual return on its investments. The present value factors of 1 at 15% are: 1 year, 0.8696; 2 years, 0.7561; 3 years, 0.6575. Which machine should Saxon purchase?A.  Only Machine A is acceptable.B.  Only Machine B is acceptable.C.  Both machines are acceptable, but A should be selected because it has the greater net present value.D.  Both machines are acceptable, but B should be selected because it has the greater net present value.E.  Neither machine is acceptable.

 

 

 

 

 

 

 

 

 

91. Holder Manufacturing is considering purchasing two machines. Each machine costs $8,000 and will produce cash flows as follows: 

End of

Machine

Year

A

B

1

$5,000

$1,000

2

4,000

2,000

3

2,000

11,000

Holder Manufacturing uses the net present value method to make the decision, and it requires a 15% annual return on its investments. The present value factors of 1 at 15% are: 1 year, 0.8696; 2 years, 0.7561; 3 years, 0.6575. Which machine should Holder purchase?A.  Only Machine A is acceptable.B.  Only Machine B is acceptable.C.  Both machines are acceptable, but A should be selected because it has the greater net present value.D.  Both machines are acceptable, but B should be selected because it has the greater net present value.E.  Neither machine is acceptable.

 

 

92. The rate that yields a net present value of zero for an investment is the:A.  Internal rate of return.B.  Accounting rate of return.C.  Net present value rate of return.D.  Zero rate of return.E.  Payback rate of return.

 

 

 

 

93. There are two basic steps in calculating the internal rate of return. Which of the following represents those two steps?

A. (1) Compute the PV factor for the project and (2) compare it to the hurdle rate.

B. (1) Compute the PV factor for the project and (2) identify the discount rate.

C. (1) Identify the discount rate and (2) compare the IRR to the hurdle rate.

D. (1) Compare IRR to the hurdle rate and (2) accept or reject the project.

E. (1) Select the hurdle rate and (2) compute the PV factor for the project.

 

 

 

 

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July 1, 2023
    

 

61.When there is a shortage in a market, prices are likely to:   

A. Fall because buyers do not wish to buy as much as sellers want to sell.

B. Rise because some buyers will offer to pay a higher price.

C. Fall because sellers are likely to reduce their production if prices rise.

D. Rise because the government will put a price ceiling in place.

62.If a market shortage exists:   

A. The invisible hand will work to reduce the price.

B. The only solution is for the government to raise the price.

C. Producers will compete for customers by reducing prices.

D. Consumers will compete for the product by offering to pay more.

63.A market surplus occurs when:   

A. People cannot buy the amount of goods and services that they are willing and able to buy.

B. The price is less than the equilibrium price.

C. The quantity supplied exceeds the quantity demanded at a given price.

D. There is a price ceiling.

64.When there is a surplus in a market, prices are likely to fall because:   

A. Buyers do not wish to buy as much as sellers want to sell.

B. Some buyers will offer to pay a higher price, initiating a move up the supply curve.

C. Sellers are likely to increase their production.

D. Buyers will wait for the government to establish a price floor.

65.If a market surplus exists:   

A. The only resolution is for the government to set the price.

B. Consumers will compete for the product buy offering to pay more.

C. Producers will compete for customers by reducing prices.

D. The equilibrium price is equal to the price ceiling.

66.If demand is constant, a decrease in the supply of gasoline will cause the equilibrium price:   

A. To rise and quantity to fall.

B. And quantity both to rise.

C. To fall and quantity to rise.

D. And quantity both to fall.

67.If demand is constant, a leftward shift in the supply curve will result in:   

A. A decrease in equilibrium quantity and a lower equilibrium price.

B. An increase in equilibrium quantity and a lower equilibrium price.

C. A decrease in equilibrium quantity and a higher equilibrium price.

D. An increase in equilibrium quantity and a higher equilibrium price.

68.The price of chocolate candy bars rises. This could be due to:   

A. A decrease in the wage rate paid to workers in the candy bar factories.

B. A decrease in the cost of chocolate, which is used to produce candy bars.

C. A subsidy by the federal government for the producers of chocolate candy bars.

D. A decrease in the number of chocolate candy bar producers.

69.If demand is unchanged, a rightward shift in the supply curve for plasma TVs will cause:   

A. A decrease in equilibrium quantity and a higher equilibrium price.

B. An increase in equilibrium quantity and a higher equilibrium price.

C. An increase in equilibrium quantity and a lower equilibrium price.

D. A decrease in equilibrium quantity and a lower equilibrium price.

70.Which of the following would cause a decrease in the price of automobiles?   

A. A technological advance in automobile manufacturing.

B. An increase in the wages paid to automobile assembly line workers.

C. A decrease in the cost of gasoline.

D. An increase in the number of buyers.

 

 

default image
July 1, 2023
    

 

61.When there is a shortage in a market, prices are likely to:   

A. Fall because buyers do not wish to buy as much as sellers want to sell.

B. Rise because some buyers will offer to pay a higher price.

C. Fall because sellers are likely to reduce their production if prices rise.

D. Rise because the government will put a price ceiling in place.

62.If a market shortage exists:   

A. The invisible hand will work to reduce the price.

B. The only solution is for the government to raise the price.

C. Producers will compete for customers by reducing prices.

D. Consumers will compete for the product by offering to pay more.

63.A market surplus occurs when:   

A. People cannot buy the amount of goods and services that they are willing and able to buy.

B. The price is less than the equilibrium price.

C. The quantity supplied exceeds the quantity demanded at a given price.

D. There is a price ceiling.

64.When there is a surplus in a market, prices are likely to fall because:   

A. Buyers do not wish to buy as much as sellers want to sell.

B. Some buyers will offer to pay a higher price, initiating a move up the supply curve.

C. Sellers are likely to increase their production.

D. Buyers will wait for the government to establish a price floor.

65.If a market surplus exists:   

A. The only resolution is for the government to set the price.

B. Consumers will compete for the product buy offering to pay more.

C. Producers will compete for customers by reducing prices.

D. The equilibrium price is equal to the price ceiling.

66.If demand is constant, a decrease in the supply of gasoline will cause the equilibrium price:   

A. To rise and quantity to fall.

B. And quantity both to rise.

C. To fall and quantity to rise.

D. And quantity both to fall.

67.If demand is constant, a leftward shift in the supply curve will result in:   

A. A decrease in equilibrium quantity and a lower equilibrium price.

B. An increase in equilibrium quantity and a lower equilibrium price.

C. A decrease in equilibrium quantity and a higher equilibrium price.

D. An increase in equilibrium quantity and a higher equilibrium price.

68.The price of chocolate candy bars rises. This could be due to:   

A. A decrease in the wage rate paid to workers in the candy bar factories.

B. A decrease in the cost of chocolate, which is used to produce candy bars.

C. A subsidy by the federal government for the producers of chocolate candy bars.

D. A decrease in the number of chocolate candy bar producers.

69.If demand is unchanged, a rightward shift in the supply curve for plasma TVs will cause:   

A. A decrease in equilibrium quantity and a higher equilibrium price.

B. An increase in equilibrium quantity and a higher equilibrium price.

C. An increase in equilibrium quantity and a lower equilibrium price.

D. A decrease in equilibrium quantity and a lower equilibrium price.

70.Which of the following would cause a decrease in the price of automobiles?   

A. A technological advance in automobile manufacturing.

B. An increase in the wages paid to automobile assembly line workers.

C. A decrease in the cost of gasoline.

D. An increase in the number of buyers.

 

 

default image
July 1, 2023
    

 

61.When there is a shortage in a market, prices are likely to:   

A. Fall because buyers do not wish to buy as much as sellers want to sell.

B. Rise because some buyers will offer to pay a higher price.

C. Fall because sellers are likely to reduce their production if prices rise.

D. Rise because the government will put a price ceiling in place.

62.If a market shortage exists:   

A. The invisible hand will work to reduce the price.

B. The only solution is for the government to raise the price.

C. Producers will compete for customers by reducing prices.

D. Consumers will compete for the product by offering to pay more.

63.A market surplus occurs when:   

A. People cannot buy the amount of goods and services that they are willing and able to buy.

B. The price is less than the equilibrium price.

C. The quantity supplied exceeds the quantity demanded at a given price.

D. There is a price ceiling.

64.When there is a surplus in a market, prices are likely to fall because:   

A. Buyers do not wish to buy as much as sellers want to sell.

B. Some buyers will offer to pay a higher price, initiating a move up the supply curve.

C. Sellers are likely to increase their production.

D. Buyers will wait for the government to establish a price floor.

65.If a market surplus exists:   

A. The only resolution is for the government to set the price.

B. Consumers will compete for the product buy offering to pay more.

C. Producers will compete for customers by reducing prices.

D. The equilibrium price is equal to the price ceiling.

66.If demand is constant, a decrease in the supply of gasoline will cause the equilibrium price:   

A. To rise and quantity to fall.

B. And quantity both to rise.

C. To fall and quantity to rise.

D. And quantity both to fall.

67.If demand is constant, a leftward shift in the supply curve will result in:   

A. A decrease in equilibrium quantity and a lower equilibrium price.

B. An increase in equilibrium quantity and a lower equilibrium price.

C. A decrease in equilibrium quantity and a higher equilibrium price.

D. An increase in equilibrium quantity and a higher equilibrium price.

68.The price of chocolate candy bars rises. This could be due to:   

A. A decrease in the wage rate paid to workers in the candy bar factories.

B. A decrease in the cost of chocolate, which is used to produce candy bars.

C. A subsidy by the federal government for the producers of chocolate candy bars.

D. A decrease in the number of chocolate candy bar producers.

69.If demand is unchanged, a rightward shift in the supply curve for plasma TVs will cause:   

A. A decrease in equilibrium quantity and a higher equilibrium price.

B. An increase in equilibrium quantity and a higher equilibrium price.

C. An increase in equilibrium quantity and a lower equilibrium price.

D. A decrease in equilibrium quantity and a lower equilibrium price.

70.Which of the following would cause a decrease in the price of automobiles?   

A. A technological advance in automobile manufacturing.

B. An increase in the wages paid to automobile assembly line workers.

C. A decrease in the cost of gasoline.

D. An increase in the number of buyers.

 

 

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