Question :
61.The break-even time (BET) method a variation of the:
A. Payback : 1258750
61.The break-even time (BET) method is a variation of the:
A. Payback method.
B. Internal rate of return method.
C. Accounting rate of return method.
D. Net present value method.
E. Present value method.
62.If a manager were concerned with the time value of money, from which two capital budgeting methods should the manager choose?
A. IRR or Payback.
B. BET or IRR.
C. BET or Payback.
D. NPV or ARR.
E. NPV or Payback.
63.The calculation of the payback period for an investment when net cash flow is even (equal) is:
A. (Cost of investment)/(Annual net cash flow)
B. (Cost of investment)/(Total net cash flow)
C. (Annual net cash flow)/(Cost of investment)
D. (Total net cash flow)/(Cost of investment)
E. (Total net cash flow)/(Annual net cash flow)
64.Coffer Co. is analyzing two projects for the future. Assume that only one project can be selected.
Project XProject Y
Cost of machine$77,000$55,000
Net cash flow:
Year 1 28,000 2,000
Year 2 28,000 25,000
Year 3 28,00025,000
Year 4020,000
If the company is using the payback period method and it requires a payback of three years or less, which project should be selected? A. Project Y.
B. Project X.
C. Both X and Y are acceptable projects.
D. Neither X nor Y is an acceptable project.
E. Project Y because it has a lower initial investment.
65.A company wishes to buy new equipment for $9,000. The equipment is expected to generate an additional $2,800 in cash inflows for six years. All cash flows occur at year-end. A bank will make a $9,000 loan to the company at a 10% interest rate so that the company can purchase the equipment. Use the table below to determine break-even time for this equipment:
YearPresent Valueof 1 at 10%
01.0000
10.9091
20.8264
30.7513
40.6830
50.6209
60.5645
A. Break-even time is between two and three years.
B. Break-even time is between three and four years.
C. Break-even time is between four and five years.
D. Break-even time is between five and six years.
E. This project will never break-even.
66.Porter Co. is analyzing two projects for the future. Assume that only one project can be selected.
Project XProject Y
Cost of machine$68,000$60,000
Net cash flow:
Year 124,0004,000
Year 224,00026,000
Year 324,00026,000
Year 4020,000
If the company is using the payback period method and it requires a payback of three years or less, which project should be selected? A. Project Y.
B. Project X.
C. Both X and Y are acceptable projects.
D. Neither X nor Y is an acceptable project.
E. Project Y because it has a lower initial investment.
67.Porter Co. is analyzing two projects for the future. Assume that only one project can be selected.
Project XProject Y
Cost of machine$68,000$60,000
Net cash flow:
Year 124,0004,000
Year 224,00026,000
Year 324,00026,000
Year 4020,000
The payback period in years for Project X is:
A. 2.00.
B. 3.83.
C. 3.50.
D. 2.83.
E. 4.00.
68.The expected amount of time to recover the initial amount of an investment is called the:
A. Amortization period.
B. Payback period.
C. Interest period.
D. Budgeting period.
E. Discounted cash flow period.
69.A company is considering purchasing a machine for $21,000. The machine will generate an after-tax net income of $2,000 per year. Annual depreciation expense would be $1,500. What is the payback period for the new machine?
A. 4 years.
B. 6 years.
C. 10.5 years.
D. 14 years.
E. 42 years.
70.A company is considering purchasing a machine for $21,000. The machine will generate an after-tax net income of $2,000 per year. Annual depreciation expense would be $1,500. What is the approximate accounting rate of return?
A. 19%
B. 33%
C. 17%
D. 10%
E. 25%
