Chap014ii test bank for mangerial acc PDF

Preview

Summary

test bank for mangerial acc test bank for mangerial acc
i think it will start for any exam thank you verry good
alll...

Description

1 2 3 4 5 6 7 8 9 10 11 12 13 14

T/F Conceptual M/C Conceptual M/C Conceptual M/C Conceptual M/C

M M E M E E E E E

x x

Professional Exam Adapted

Other topics

LO8: (Appendix 14C) Income tax

LO6: Simple rate of return

LO5: Payback

LO4: Preference ranking

LO3: Uncertain cash flows

LO2: Internal rate of return

LO7: (Appendix 14A) Present value concepts

Question Type T/F T/F T/F T/F T/F T/F T/F T/F T/F

LO1: Net present value

Difficulty

Chapter 014, Capital Budgeting Decisions

ID 4/e: 14-838 4/e: 14-839 3/e: 14-5 3/e: 15-8 2/e: 14-8 4/e: 15-897 12/11/94, F 2/e: 14-10 4/e: 15-910

x x x x x x x x

E

x

M

x

x

M

x

x

M

x

M

x

x

CMA

8/e: ATB14-01 CMA, 6/93, Part 4, Q26

CMA

8/e: ATB14-18 CMA, 6/92, Part4, Q16 3/e: 14-17

http://iiqtisad.blogspot.com/ 14-1

Origin Authors Authors Authors Authors Authors Authors E.N. Authors Authors David Keyes CMA David Keyes CMA Authors

CMA/CPA origin

CMA, 6/93, Part 4, Q26 CMA, 6/92, Part4, Q16

Chapter 014, Capital Budgeting Decisions

21 22 23

Conceptual M/C Conceptual M/C Conceptual M/C Conceptual M/C Conceptual M/C Conceptual M/C Conceptual M/C M/C M/C

24 25 26 27 28 29 30

15 16 17 18 19 20

M

x

x

M

x

x

M

x

M

x

CMA

CMA, 12/93, Part 4, Q17

CMA

8/e: ATB14-20 CMA, 12/92, Part 4, Q13

x

CMA David Keyes

8/e: ATB15-21

CMA David Keyes

E

x

3/e: 15-31

CMA

M

x

4/e: 15-947 CMA, 12/94, Part 4, Q24 2/e: 13-8 1/e:Exam#5,II,10

Authors

E H H

x x x

x x

M/C M/C M/C M/C M/C M/C M/C

H H H M M M M

x x x x x x x

x

31 32 33

M/C M/C M/C

M H H

x x x

34

M/C

E

x

35

M/C

E

x

36 37

M/C M/C

E M

x

38

M/C

E

CMA

8/e: ATB14-46 12/13/94,I 1/e: 14-5 2/e: 13-3 3/e: 13-3 4/e: 14-857 1/e:Exam#5,II,7

x

8/e: ATB14-28 9eLD:CH14Q10 9eLD:CH14Q20 10/11/2004 Single MC J3 10/11/2004 Single MC K3 10/11/2004 Single MC L3 2/e: 13-6 10/12/2004 Single MC M3

x x

http://iiqtisad.blogspot.com/ 14-2

CMA Authors Authors David Keyes E.N. Authors Authors Authors Authors Authors David Keyes Authors Authors E.N. E.N. E.N. Authors E.N.

CMA, 12/93,Part 4, Q17

CMA, 12/92, Part 4, Q13

CMA, 12/94, Part 4, Q24

Chapter 014, Capital Budgeting Decisions 10/12/2004 Single MC N3 10/12/2004 Single MC O3 10/12/2004 Single MC P3 10/12/2004 Single MC Q3 10/12/2004 Single MC R3 10/12/2004 Single MC S3

39

M/C

E

x

40

M/C

E

x

41

M/C

E

x

42

M/C

E

x

43

M/C

E

x

44

M/C

E

x

45 46 47

M/C M/C M/C

M E E

x x x

48

M/C

E

x

49

M/C

E

x

50

M/C

E

x

51 52 53 54

M/C M/C M/C M/C

E M E M

x

55

M/C

E

x

56 57

M/C M/C

E H

x

58

M/C

E

x

59

M/C

E

x

60

M/C

E

x

x x x

CMA

x

http://iiqtisad.blogspot.com/ 14-3

8/e: ATB15-55 5/e: 15-27 3/e: 15-16 10/13/2004 Single MC T3 10/13/2004 Single MC U3 10/13/2004 Single MC V3 10/13/2004 Single MC W3 12/13/94,B 4/e: 15-920 CMA,12/93,IV-18 10/13/2004 Single MC X3 10/13/2004 Single MC Y3 12/13/94,E 10/14/2004 Single MC Z3 10/14/2004 Single MC AA3 10/14/2004 Single MC AB3

E.N. E.N. E.N. E.N. E.N. E.N. David Keyes Authors Authors E.N. E.N. E.N. E.N. E.N. Authors CMA E.N. E.N. E.N. E.N. E.N. E.N.

CMA,12/93,IV-18

Chapter 014, Capital Budgeting Decisions 10/14/2004 Single MC AC3 10/14/2004 Single MC AD3 1/e:Exam#5,II,1213

61

M/C

E

x

62

M/C

E

x

63-66

Multipart M/C

E-M

x

x

x

x

67-70 71-72

Multipart M/C Multipart M/C

E-M M

x x

x x

x

x

73-74

Multipart M/C

M

x

x

CMA

75-76 77-80 81-84 85-87

Multipart M/C Multipart M/C Multipart M/C Multipart M/C

E E E E-M

x x x x

x

CMA

88-89

Multipart M/C

E

x

90-91

Multipart M/C

E

x

92-93

Multipart M/C

E

x

94-95

Multipart M/C

E

x

96-97

Multipart M/C

E

x

98-99

Multipart M/C

E

x

100-101

Multipart M/C

E-M

x

102-103 104-105 106-107 108 109 110

Multipart M/C Multipart M/C Multipart M/C Problem Problem Problem

E-M E-M E-M M M M

x

x x x

x x

x x x

x x x

http://iiqtisad.blogspot.com/ 14-4

8/e: ATB14-37 to 40 5/e: 14-66 to 67 10/13/2003 Multi MC A3 10/13/2003 Multi MC B3 4/e: 14-865 to 869 4/e: 14-879 to 883 5/e: 14-49 to 52 10/11/2004 Multi MC G3 10/11/2004 Multi MC H3 10/11/2004 Multi MC I3 10/12/2004 Multi MC J3 10/12/2004 Multi MC K3 10/12/2004 Multi MC L3 10/13/2004 Multi MC M3 10/13/2004 Multi MC N3 1/e: 15-8 to 9 3/e: 15-6 to 7 12/14/94,B 2/e: Problem 13-3 2/e: Problem 13-1

E.N. E.N. Authors David Keyes Authors CMA CMA Authors Authors Authors E.N. E.N. E.N. E.N. E.N. E.N. E.N. E.N. Authors Authors E.N. Authors Authors

CMA, 12/95, Part 4, Q12&13 CMA, 12/95, Part 4, Q12&13

Chapter 014, Capital Budgeting Decisions 111

Problem

M

x

3/e: Problem 14-2

112

Problem

M

x

113

Problem

E

x

114

Problem

E

x

115

Problem

E

x

116

Problem

E

x

117

Problem

E

x

118

Problem

E

x

119 120

Problem Problem

E H

x

121

Problem

E

x

122

Problem

E

x

123 124

Problem Problem

E H

x

125

Problem

E

x

126

Problem

E

x

127

Problem

E

x

128

Problem

E

x

129 130

Problem Problem

E E

x

131

Problem

E

9eLD:CH14P1 10/14/2003 Problem L3 10/14/2003 Problem M3 10/14/2003 Problem N3 10/14/2003 Problem O3 10/11/2004 Problem R3 10/11/2004 Problem S3 10/11/2004 Problem T3 3/e: Problem 14-2 10/12/2004 Problem U3 10/12/2004 Problem V3 10/12/2004 Problem W3 7/10/2001,I6 10/12/2004 Problem X3 10/12/2004 Problem Y3 10/12/2004 Problem Z3 10/13/2004 Problem AA3 10/13/2004 Problem AB3 3/e: Problem 15-1 10/14/2003 Problem P3

x

x

x

x

x

x

http://iiqtisad.blogspot.com/ 14-5

Authors Larry Deppe E.N. E.N. E.N. E.N. E.N. E.N. E.N. Authors E.N. E.N. E.N. E.N. E.N. E.N. E.N. E.N. E.N. Authors E.N.

Chapter 014, Capital Budgeting Decisions 132

Problem

M

x

x

133

Problem

E

x

134

Problem

E

x

135

Problem

E

x

136

Problem

E

x

137

Problem

E

x

138

Problem

E

x

http://iiqtisad.blogspot.com/ 14-6

10/14/2003 Problem Q3 10/13/2004 Problem AC3 10/13/2004 Problem AD3 10/14/2004 Problem AE3 10/14/2004 Problem AF3 10/14/2004 Problem AG3 10/14/2004 Problem AH3

E.N. E.N. E.N. E.N. E.N. E.N. E.N.

Chapter 014, Capital Budgeting Decisions

True / False Questions 1. When the net present value method is used, the internal rate of return is the discount rate used to compute the net present value of a project. True False

2. The net present value method assumes that cash flows from a project are immediately reinvested at a rate of return equal to the discount rate. True False

3. When using internal rate of return to evaluate investment projects, if the internal rate of return is less than the required rate of return, the project would be accepted. True False

4. In preference decision situations, a project with a high net present value will always be preferable to a project with a lower net present value. True False

5. An investment project with a project profitability index of less than zero should ordinarily be rejected. True False

6. Screening decisions follow preference decisions and seek to rank investment proposals in order of their desirability. True False

7. The payback period is the length of time it takes for an investment to recoup its initial cost out of the cash receipts it generates. True False

14-7

Chapter 014, Capital Budgeting Decisions

8. The payback method of making capital budgeting decisions gives full consideration to the time value of money. True False

9. One strength of the simple rate of return method is that it takes into account the time value of money in computing the return on an investment project. True False

10. In capital budgeting decisions, a $10,000 decrease in annual cash outflows can be treated as if it is a $10,000 increase in annual cash inflows. True False

Multiple Choice Questions 11. A project profitability index greater than zero for a project indicates that: A. the discount rate is less than the internal rate of return. B. there has been a calculation error. C. the project is unattractive and should not be pursued. D. the company should reevaluate its discount rate.

14-8

Chapter 014, Capital Budgeting Decisions

12. In capital budgeting, what will be the effect on the following if there is an increase in the discount rate?

A. Choice A B. Choice B C. Choice C D. Choice D E. Choice E

13. The net present value method assumes that the project's cash flows are reinvested at the: A. internal rate of return. B. the simple rate of return. C. the discount rate used in the net present value calculation. D. the payback rate of return.

14. The total-cost approach and the incremental-cost approach to evaluating two competing investment opportunities: A. are dissimilar in that one deals with net present value and the other deals with internal rate of return. B. are similar in that they will recommend the same alternative as the best. C. are dissimilar in that one uses the cost of capital as a discount rate and the other does not. D. are similar in that neither considers the time value of money.

14-9

Chapter 014, Capital Budgeting Decisions

15. (Ignore income taxes in this problem.) How is depreciation handled by the following capital budgeting techniques?

A. Choice A B. Choice B C. Choice C D. Choice D

16. Rennin Dairy Corporation is considering a plant expansion decision that has an estimated useful life of 20 years. This project has an internal rate of return of 15% and a payback period of 9.6 years. How would a decrease in the expected salvage value from this project in 20 years affect the following for this project?

A. Choice A B. Choice B C. Choice C D. Choice D E. Choice E

14-10

Chapter 014, Capital Budgeting Decisions

17. A weakness of the internal rate of return method for screening investment projects is that it: A. does not consider the time value of money. B. implicitly assumes that the company is able to reinvest cash flows from the project at the company's discount rate. C. implicitly assumes that the company is able to reinvest cash flows from the project at the internal rate of return. D. does not take into account all of the cash flows from a project.

18. Cresol Corporation has a large number of potential investment opportunities that are acceptable. However, Cresol does not have enough investment funds to invest in all of them. Which calculation would be the best one for Cresol to use to determine which projects to choose? A. payback period B. simple rate of return C. net present value D. project profitability index

19. The payback method measures: A. how quickly investment dollars may be recovered. B. the cash flow from an investment. C. the economic life of an investment. D. the project profitability of an investment.

20. An investment project that requires a present investment of $210,000 will have cash inflows of "R" dollars each year for the next five years. The project will terminate in five years. Consider the following statements (ignore income tax considerations): I. If "R" is less than $42,000, the payback period exceeds the life of the project. II. If "R" is greater than $42,000, the payback period exceeds the life of the project. III. If "R" equals $42,000, the payback period equals the life of the project. Which statement(s) is (are) true? A. Only I and II. B. Only I and III. C. Only II and III. D. I, II, and III. E. none of these.

14-11

Chapter 014, Capital Budgeting Decisions

21. The capital budgeting method that divides a project's annual incremental net operating income by the initial investment is the: A. internal rate of return method. B. the simple rate of return method. C. the payback method. D. the net present value method.

22. (Ignore income taxes in this problem.) Sue Falls is the president of Sports, Inc. She is considering buying a new machine that would cost $14,125. Sue has determined that the new machine promises an internal rate of return of 12%, but Sue has misplaced the paper which tells the annual cost savings promised by the new machine. She does remember that the machine has a projected life of 10 years. Based on these data, the annual cost savings are: A. It is impossible to determine from the data given. B. $1,412.50 C. $2,500.00 D. $1,695.00

23. (Ignore income taxes in this problem.) Joe Flubup is the president of Flubup, Inc. He is considering buying a new machine that would cost $25,470. Joe has determined that the new machine promises an internal rate of return of 14%, but Joe has misplaced the paper which tells the annual cost savings promised by the new machine. He does remember that the machine has a projected life of 12 years. Based on these data, the annual cost savings are: A. It is impossible to determine from the given data. B. $2,122.50 C. $4,500.00 D. $4,650.00

24. (Ignore income taxes in this problem.) Cuarto Corporation just invested in a project that has an internal rate of return of 24%. This project is expected to generate $44,000 of net cash inflows each year of its 6 year life. The project has no salvage value. What was the initial investment required for this project? A. $63,360 B. $72,600 C. $132,880 D. $160,000

14-12

Chapter 014, Capital Budgeting Decisions

25. (Ignore income taxes in this problem.) Highpoint, Inc., is considering investing in automated equipment with a ten-year useful life. Managers at Highpoint have estimated the cash flows associated with the tangible costs and benefits of automation, but have been unable to estimate the cash flows associated with the intangible benefits. Using the company's 10% discount rate, the net present value of the cash flows associated with just the tangible costs and benefits is a negative $184,350. How large would the annual net cash inflows from the intangible benefits have to be to make this a financially acceptable investment? A. $18,435 B. $30,000 C. $35,000 D. $37,236

26. (Ignore income taxes in this problem.) Given the following data:

Based on the data given, the annual cost savings would be: A. $1,630.00 B. $2,200.00 C. $2,123.89 D. $2,553.89

27. (Ignore income taxes in this problem.) Parks Company is considering an investment proposal in which a working capital investment of $10,000 would be required. The investment would provide cash inflows of $2,000 per year for six years. The working capital would be released for use elsewhere when the project is completed. If the company's discount rate is 10%, the investment's net present value is: A. $1,290 B. $(1,290) C. $2,000 D. $4,350

14-13

Chapter 014, Capital Budgeting Decisions

28. (Ignore income taxes in this problem.) Boston Company is contemplating the purchase of a new machine on which the following information has been gathered:

The company's discount rate is 16%, and the machine will be depreciated using the straightline method. Given these data, the machine has a net present value of: A. -$26,100 B. -$23,900 C. $0 D. +$26,100

29. (Ignore income taxes in this problem.) The Whitton Company uses a discount rate of 16%. The company has an opportunity to buy a machine now for $18,000 that will yield cash inflows of $10,000 per year for each of the next three years. The machine would have no salvage value. The net present value of this machine to the nearest whole dollar is: A. $22,460 B. $4,460 C. $(9,980) D. $12,000

30. (Ignore income taxes in this problem.) The following data pertain to an investment:

The net present value of the proposed investment is: A. $3,355 B. $(3,430) C. $0 D. $621

14-14

Chapter 014, Capital Budgeting Decisions

31. (Ignore income taxes in this problem.) Kumanu, Inc. is considering investing in new FMS equipment for its factor...