ACC 350 TEST 6 REVIEW (Questions& Answers)

Document Content and Description Below

A post-audit in capital budgeting is a comparison of the actual results of capital investments with the projected results. Lora Corporation will receive $10,000 a year at the end of each of the next ... five years. Using a discount rate of 14%, the present value of the receipts can be stated as ________. Landmark Prints is considering an investment in new equipment costing $520,000. The equipment will be depreciated on a straight-line basis over a five-year life and is expected to generate net cash inflows of $128,000 the first year, $160,000 the second year, and $154,000 every year thereafter until the fifth year. What is the payback period for this investment? The residual value is zero. (Round your answer to two decimal places.) Sensitivity analysis is a technique that ________. Caliber Lawnmowers is considering the purchase of a new machine costing $804,000. The company's management is estimating that the new machine will generate additional cash flows of $180,000 a year for ten years and have a residual value of $62,000 at the end of ten years. What is the machine's payback period? (Round your answer to two decimal places.) Both the payback and the accounting rate of return methods focus on cash flows that an asset generates. The payback and accounting rate of return (ARR) methods are suitable for investments with a relatively short time span. Net cash inflows from a capital investment arise from an increase in revenues, a decrease in expenses, or both. The net present value of future cash inflows received in earlier years is higher than future cash inflows received in later years. When evaluating a potential investment, managers should use only one measure for making a sound investment decision. Zane Set Designs Company has received an award which entitles it to receive annual payments of $10,000 at the end of each year for the next ten years. Which of the following is used to calculate today's value of this award? The fact that invested cash earns income over time is called the time value of money. The last step in the capital budgeting process is control, which compares the actual results with the projected results. These comparisons are known as ________. The discount rate used in a net present value analysis is the ________. Which of the following two methods are typically used for initial screening of investments, rather than for detailed, in-depth analysis? Capital asset Capital investment Capital budgeting Capital rationing Post-audit Payback Accounting rate of return (ARR) Simple interest Compound interest Net present value (NPV) Discount rate Internal rate of return (IRR) Four popular methods of analyzing potential capital investments are: Stages of capital budgeting: Which of the following describes the time value of money? Which of the following most accurately describes an annuity? Net cash inflows from a capital investment arise from an increase in revenues, a decrease in expenses, or both. The fact that invested cash earns income over time is called the time value of money. The accounting rate of return is calculated by dividing the average annual operating income by the average amount invested. An opportunity cost is the benefit foregone by choosing an alternative course of action. The accounting rate of return also is known as the average rate of return or annual rate of return. The payback and accounting rate of return methods are often used to perform an initial screening of investments. Landmark Prints is considering an investment in new equipment costing $520,000. The equipment will be depreciated on a straight-line basis over a five-year life and is expected to generate net cash inflows of $128,000 the first year, $160,000 the second year, and $154,000 every year thereafter until the fifth year. What is the payback period for this investment? The residual value is zero. (Round your answer to two decimal places.) The discount rate used in a net present value analysis is the ________. A post-audit in capital budgeting is a comparison of the actual results of capital investments with the projected results. The net present value method of evaluating capital investments suggests that an investment with net cash inflows which exceed the initial cost of the investment is desirable. Which of the following two methods are typically used for initial screening of investments, rather than for detailed, in-depth analysis? The last step in the capital budgeting process is control, which compares the actual results with the projected results. These comparisons are known as ________. [Show More]

Last updated: 2 years ago

Preview 1 out of 4 pages