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ACC 560 week 9 Quiz 12

TRUE-FALSE STATEMENTS

1. Funding budgeting decisions usually involve huge investments and also often have a far-reaching impact on a company"s future profitability.

2. The funding budgeting committee ultimately approves the capital expenditure budget plan for the year.

3. For purposes of resources budgeting, estimated cash inflows and outflows are preferred for inputs right into the capital budgeting decision tools.

4. The cash payback method is a quick way to calculate a project"s net current value.

5. The cash payback period is computed by dividing the price of the funding investment through the net annual cash inflow.

6. The cash payback technique is frequently used together a screening tool but it does not take into think about THE benefit of a project.

7. The cost of capital is a weighted mean of the prices paid on obtained funds, as well as on funds detailed by investors in the company"s stock.

8. Using the net present value method, a net existing value of zero shows that the task would no be acceptable.

9. The net current value an approach can just be used in funding budgeting if the expected cash flows from a job are an equal amount each year.

10. By skipping intangible benefits, capital budgeting techniques might incorrectly eliminate projects that can be financially advantageous to the company.

11. To stop accepting projects that actually should be rejected, a firm should neglect intangible benefits in calculating net existing value.

12. One method of combine intangible benefits into the funding budgeting decision is to project conservative estimates of the worth of the intangible benefits and include castle in the NPV calculation.

13. The profitability table of contents is calculation by splitting the total cash operation by the early investment.

14. The profitability index enables comparison the the relative desirability of jobs that call for differing early stage investments.

15. Sensitivity analysis uses a variety of outcome estimates to acquire a sense of the variability among potential returns.

16. A well-run organization must perform an evaluation, referred to as a post-audit, that its invest projects prior to their completion.


17. Post-audits create an incentive for supervisors to make exact estimates, since managers understand that their results will it is in evaluated.

18. A post-audit is an testimonial of just how well a project"s actual performance matches the projections made once the job was proposed.

19. The inner rate of return method is, choose the NPV method, a discounted cash circulation technique.

20. The interest yield of a job is a price that will reason the present value of the proposed funding expenditure to equal the current value of the expected yearly cash inflows.

21. Making use of the internal rate the return method, a project is rejected when the rate of return is better than or same to the required rate that return.

22. Making use of the annual rate the return method, a task is agree if its rate of return is better than management"s minimum rate of return.

23. The annual rate of return an approach requires splitting a project"s yearly cash inflows by the economic life of the project.

24. A significant advantage the the yearly rate of return method is that it considers the moment value the money.

25. An benefit of the yearly rate the return an approach is the it depends on accrual accountancy numbers rather than really cash flows.

MULTIPLE choice QUESTIONS

26. The capital budget for the year is approved by a company"s

a. Board of directors.

b. Capital budgeting committee.

c. Officers.

d. Stockholders.

27. All of the complying with are affiliated in the funding budgeting evaluation procedure except a company"s

a. Plank of directors.

b. Capital budgeting committee.

c. Officers.

d. Stockholders.

28. Most of the funding budgeting techniques use

a. Accrual accountancy numbers.

b. Cash flow numbers.

c. Network income.

d. Accrual bookkeeping revenues.

29. The first step in the resources budgeting evaluation process is to

a. Request proposals for projects.

b. Screen proposals by a resources budgeting committee.

c. Identify which jobs are worthy that funding.

d. Approve the capital budget.

30. The resources budgeting decision depends in part on the

a. Availability of funds.

b. Relationships amongst proposed projects.

c. Risk associated with a specific project.

d. Every one of these.

31. Funding budgeting is the process

a. Used in offer or procedure further decisions.

b. The determining exactly how much resources stock come issue.

c. That making capital expenditure decisions.

d. Of removed unprofitable product lines.

32. Net annual cash flow can be approximated by

a. Deducting credit sales from network income.

b. Including depreciation price to net income.

c. Deducting credit purchases from network income.

d. Adding advertising expense to net income.

33. Which of the complying with is no a common cash circulation related to devices purchase and also replacement decisions?

a. Raised operating costs

b. Overhaul of equipment

c. Salvage value of tools when project is complete

d. Depreciation expense

34. Capital expenditure proposals are initially screened by the

a. Board of directors.

b. Executive, management committee.

c. Capital budgeting committee.

d. Stockholders.


35. Resources budgeting decisions count in component on all of the following other than the

a. Relationships amongst proposed projects.

b. Benefit of the company.

c. Company’s basic decision making approach.

d. Risks linked with a specific project.

36. The corporate capital budget authorization procedure consists of how many steps?

a. 4

b. 3

c. 2

d. 1

37. I beg your pardon of the complying with is no a funding budgeting decision?

a. Constructing new studios

b. Instead of old equipment

c. Scrapping useless inventory

d. Remodeling an office building

38. Which of the complying with is a disadvantage of the cash payback technique?

a. The is an overwhelming to calculate

b. It relies on the moment value that money

c. It can only it is in calculated as soon as there are equal annual net cash flows

d. That ignores the expected profitability of a project

39. The payback duration is often contrasted to an asset’s

a. Estimated useful life.

b. Guarantee period.

c. Net current value.

d. Inner rate that return.

40. Which of the following ignores the moment value the money?

a. Internal rate that return

b. Benefit index

c. Net existing value

d. Cash payback

41. Brady Corp. Is considering the acquisition of a piece of equipment that expenses $20,000. Projected net annual cash flows over the project’s life are:

Year Net annual Cash Flow

1 $ 3,000

2 8,000

3 15,000

4 9,000

The cash payback duration is

a. 2.29 years.

b. 2.60 years.

c. 2.40 years.

d. 2.31 years.

42. Bradshaw Inc. Is contemplating a resources investment of $88,000. The cash flows over the project’s four years are:

Expected annual Expected Annual

Year Cash Inflows Cash Outflows

1 $30,000 $12,000

2 45,000 20,000

3 60,000 25,000

4 50,000 30,000

The cash payback period is

a. 3.59 years.

b. 3.50 years.

c. 2.37 years.

d. 3.20 years.

43. Jordan firm is considering the acquisition of a an equipment with the following data:

Initial expense $150,000

One-time training price 12,000

Annual maintenance costs 15,000

Annual cost savings 75,000

Salvage worth 20,000

The cash payback period is

a. 2.70 years.

b. 2.50 years.

c. 2.37 years.

d. 2.17 years.

44. If project A has a lower payback period than job B, this may suggest that job A may have actually a

a. Reduced NPV and also be much less profitable.

b. Greater NPV and be much less profitable.

c. Greater NPV and also be an ext profitable.

d. Lower NPV and also be an ext profitable.

45. I m sorry of the complying with does not think about a company’s forced rate of return?

a. Net current value

b. Internal rate the return

c. Yearly rate of return

d. Cash payback

46. The cash payback technique

a. Considers cash flows over the life the a project.

b. Can not be offered with uneven cash flows.

c. Is premium to the net existing value method.

d. Might be valuable as an initial screening device.

47. If one asset costs $240,000 and is intended to have a $40,000 salvage worth at the finish of its ten-year life, and generates annual net cash inflows the $40,000 each year, the cash payback duration is

a. 7 years.

b. 6 years.

c. 5 years.

d. 4 years.

48. If a payback duration for a job is greater than that is expected useful life, the

a. Project will constantly be profitable.

b. Entire initial investment will certainly not be recovered.

c. Task would just be acceptable if the company"s price of resources was low.

d. Project"s return will constantly exceed the company"s cost of capital.

49. The cash payback technique

a. Should be provided as a final screening tool.

b. Have the right to be the only basis because that the capital budgeting decision.

c. Is reasonably easy come compute and also understand.

d. Considers the meant profitability the a project.

50. The cash payback duration is computed by dividing the expense of the funding investment through the

a. Annual net income.

b. Net annual cash inflow.

c. Present value of the cash inflow.

d. Present value of the net income.

51. Once using the cash payback technique, the payback duration is express in state of

a. A percent.

b. Dollars.

c. Years.

d. Months.

52. A disadvantage that the cash payback an approach is that it

a. Ignores obsolescence factors.

b. Ignores the price of an investment.

c. Is complex to use.

d. Ignores the moment value of money.

53. Bark company is considering buying a maker for $240,000 with an estimated life that ten years and also no salvage value. The straight-line technique of depreciation will certainly be used. The device is expected to generate net earnings of $6,000 each year. The cash payback duration on this invest is

a. 20 years.

b. 10 years.

c. 8 years.

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d. 4 years.

54. A firm is considering purchasing a an equipment that costs $400,000 and is approximated to have no salvage worth at the finish of that is 8-year useful life. If the machine is purchased, yearly revenues space expected to it is in $100,000 and also annual operating expenses exclusive the depreciation price are supposed to it is in $38,000. The straight-line an approach of depreciation would be used. The cash payback duration on the device is