Question :
81. Which method of evaluating capital investment decisions uses the concept : 1208004
81. Which method of evaluating capital investment decisions uses the concept of present value to compute a rate of return?
A. Unadjusted rate of return
B. Internal rate of return
C. Net present value
D. Payback
82. Cash inflows generated by capital investments included all of the following except:
A. Incremental revenues.
B. Cost savings.
C. Reduction in the amount of working capital.
D. Increase in operating expenses.
83. Cash outflows generated by capital investments include all of the following except:
A. Incremental revenues.
B. Initial investment in the capital asset.
C. Increase in operating expenses.
D. Increase in working capital.
84. Sarah Meyers is considering alternative proposals that involve different amounts of investments. To compare different size investment proposals, it may be helpful for Sarah to prepare a relative ranking of the proposals by using a(n):
A. Net present value.
B. Present value index.
C. Internal rate of return.
D. None of the other answers are correct.
85. The present value index indicates:
A. The time it will take to recover the initial cash outflow of an investment.
B. The additional cash inflows from operating activities.
C. The rate of return per dollar invested in a capital project.
D. None of the other answers are correct.
86. The length of time required to recover the initial investment in a capital asset is known as the:
A. The rate of return.
B. Payback method.
C. Internal rate of return.
D. Unadjusted rate of return.
87. The time value of money concept recognizes that a dollar today is worth more than a dollar tomorrow. Which of the following is not a factor in causing the present value of cash inflows to diminish over time?
A. Current expenses.
B. Earning potential, such as interest.
C. Risk of uncollectability.
D. Inflation reduces future purchasing power.
88. The difference between an ordinary annuity and an annuity due is:
A. An ordinary annuity represents a present value and an annuity due represents a future value.
B. An ordinary annuity represents a future value and an annuity due represents a present value.
C. An ordinary annuity assumes the cash flows occur at the end of the period and an annuity due assumes the cash flows occur at the beginning of the period.
D. An ordinary annuity assumes the cash flows occur at the beginning of the period and an annuity due assumes the cash flows occur at the end of the period.
89. Candy Cups thinks that offering delivery will increase their sales. Candy is considering whether to purchase a used delivery truck costing $12,000. Net cash inflow from the delivery service will be $3,400. The truck will last approximately 5 years.
What is the unadjusted rate of return based on the average investment?
A. About 16.7%
B. About 166.6%
C. About 18.3%
D. About183.3%
90. Which of the following statements is incorrect?
A. The further into the future a cash receipt is expected to occur, the higher is its present value.
B. The return on investment measures the compensation a company expects to receive from investing in capital assets.
C. Most companies use their cost of capital to estimate the minimum return on investment required from capital investments.
D. When a company invests in capital assets, it sacrifices present dollars for the opportunity to receive future dollars.
91. The process by which management evaluates long-term investment decisions involving long term operational assets is called:
A. Fixed cost analysis.
B. Activity based management.
C. Strategic business analysis.
D. Capital investment analysis.
92. Which of the following statements is correct?
A. A postaudit should be conducted at the time a capital investment is purchased.
B. The postaudit of a capital investment project should be made using the same analytical technique that was used in deciding to make the investment.
C. The purpose of postaudits is to improve a company’s cost-volume-profit analysis.
D. The postaudit process uses expected cash flows and the company’s cost of capital.
