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Capital budgeting is the process of analyzing alternative long-term investments and deciding which assets to acquire or sell. True False Capital budgeting decisions are risky because the outcome is uncertain, large amounts are usually involved, the investment involves a long-term commitment, and the decision could be difficult or impossible to reverse. True False If the internal rate of return (IRR) of an investment is below the hurdle rate, the project should be accepted. True False Neither the payback period nor the accounting rate of return methods of evaluating investments considers the time value of money. True False An opportunity cost is the potential benefit that is lost by taking a specific action when two or more alternative choices are available. True False A sunk cost will change with a future course of action. True False An out-of-pocket cost requires a current and/or future outlay of cash. True False Another name for relevant cost is unavoidable cost. True False Relevant benefits refer to the additional or incremental revenue generated by selecting a particular course or action over another. True False

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10. Significant sunk costs are relevant to decisions about the future. True False 11. The concept of incremental cost is the same as the concept of differential cost. True False 12. A special order of goods or services should always be accepted when the incremental revenue exceeds the incremental costs. True False 13. In a make or buy decision, management should focus on costs that are constant under the two alternatives. True False 14. Part of the decision to accept additional business should be based on a comparison of the incremental (differential) costs of the added production with the additional revenues to be received. True False 15. Incremental costs should be considered in a make or buy decision. True False

16. If a company has the capacity to produce either 10,000 units of Product X or 10,000 units of Product Y; assuming fixed costs remain constant, production restrictions are the same for both products, and the markets for both products are unlimited; the company should commit 100% of its capacity to the product that has the higher contribution margin. True False 17. The decision to accept an additional volume of business should be based on a comparison of the revenue from the additional business with the sunk costs of producing that revenue. True False 18. An advantage of the break-even time (BET) method over the payback period method is that it recognizes the time value of money. True False 19. In ranking choices with the break-even time (BET) method, the investment with the highest BET measure gets the highest rank. True False 20. When computing payback period, the year in which a capital investment is made is year 1. True False 21. The payback method of evaluating an investment fails to consider how long the investment will generate cash inflows beyond the payback period. True False 22. The time value of money is considered when calculating the payback period of an investment. True False 23. Two investments with exactly the same payback periods are always equally valuable to an investor. True False 24. The payback method, unlike the net present value method, does not ignore cash flows after the point of cost recovery. True False 25. If two projects have the same risks, the same payback periods, and the same initial investments, they are equally attractive. True False 26. A disadvantage of an investment with a short payback period is that it will produce revenue for only a short period of time. True False 27. If the straight-line depreciation method is used, the annual average investment amount used in calculating rate of return is calculated as (beginning book value + ending book value)/2. True False 28. The accounting rate of return uses cash flows in its calculation. True False 29. If net present values are used to evaluate two investments that have equal costs and equal total cash flows, the one with more cash flows in the early years has the higher net present value. True False 30. The net present value decision rule is: When an asset's expected cash flows are discounted at the required rate and yield a positive net present value, the asset should be acquired. True False 31. The internal rate of return equals the rate that yields a net present value of zero for an investment. True False

32. Use of the internal rate of return method cannot be used with uneven cash flows. True False 33. Capital budgeting decisions usually involve analysis of: A. Cash outflows only. B. Short-term investments. C. Long-term investments. D. Investments with certain outcomes only. E. Operating revenues. 34. The process of analyzing alternative investments and deciding which assets to acquire or sell is known as: A. Planning and control. B. Capital budgeting. C. Variance analysis. D. Master budgeting. E. Managerial accounting. 35. Capital budgeting decisions are generally based on: A. Tentative predictions of future outcomes. B. Perfect predictions of future outcomes. C. Results from past outcomes only. D. Results from current outcomes only. E. Speculation of interest rates and economic performance only. 36. The calculation of annual net cash flow from a particular investment project should include all of the following except: A. Income taxes. B. Revenues generated by the investment. C. Cost of products generated by the investment. D. Depreciation expense. E. General and administrative expenses. 37. Capital budgeting decisions are risky because: A. The outcome is uncertain. B. Large amounts of money are usually involved. C. The investment involves a long-term commitment. D. The decision could be difficult or impossible to reverse. E. All of these are true 38. The process of restating future cash flows in today's dollars is known as: A. Budgeting. B. Annualization. C. Discounting. D. Payback period. E. Capitalizing. 39. A minimum acceptable rate of return for an investment decision is called the: A. Internal rate of return. B. Average rate of return. C. Hurdle rate. D. Maximum rate. E. Payback rate.

40. In business decision-making, managers typically examine the two fundamental factors of: A. Risk and capital investment. B. Risk and rate of return. C. Capital investment and rate of return. D. Risk and payback. E. Payback and rate of return. 41. A limitation of the internal rate of return method is: A. Failure to measure time value of money. B. Failure to measure results as a percent. C. Failure to consider the payback period. D. Failure to reflect changes in risk levels over project life. E. Failure to compare dissimilar projects. 42. An opportunity cost: A. Is an unavoidable cost. B. Requires a current outlay of cash. C. Results from past managerial decisions. D. Is the lost benefit of choosing an alternative course of action. E. Is irrelevant in decision making. 43. The potential benefits of one alternative that are lost by choosing another is known as a(n): A. Alternative cost. B. Sunk cost. C. Out-of-pocket cost. D. Differential cost. E. Opportunity cost. 44. A cost that requires a current and/or future outlay of cash, and is usually an incremental cost, is a(n): A. Out-of-pocket cost. B. Sunk cost. C. Opportunity cost. D. Operating cost. E. Uncontrollable cost. 45. A cost that cannot be avoided or changed because it arises from a past decision, and is irrelevant to future decisions, is called a(n): A. Uncontrollable cost. B. Incremental cost. C. Opportunity cost. D. Out-of-pocket cost. E. Sunk cost. 46. A company paid $200,000 ten years ago for a specialized machine that has no salvage value and is being depreciated at the rate of $10,000 per year. The company is considering using the machine in a new project that will have incremental revenues of $28,000 per year and annual cash expenses of $20,000. In analyzing the new project, the $10,000 depreciation on the machine is an example of a(n): A. Incremental cost. B. Opportunity cost. C. Variable cost. D. Sunk cost. E. Out-of-pocket cost. 47. An additional cost incurred only if a particular action is taken is a(n): A. Period cost. B. Pocket cost. C. Discount cost. D. Incremental cost. E. Sunk cost.

48. A company is considering a new project that will cost $19,000. This project would result in additional annual revenues of $6,000 for the next 5 years. The $19,000 cost is an example of a(n): A. Sunk cost. B. Fixed cost. C. Incremental cost. D. Uncontrollable cost. E. Opportunity cost. 49. Patrick Corporation inadvertently produced 10,000 defective personal radios. The radios cost $8 each to produce. A salvage company will purchase the defective units as they are for $3 each. Patrick's production manager reports that the defects can be corrected for $5 per unit, enabling them to be sold at their regular market price of $12.50. Patrick should: A. Sell the radios for $3 per unit. B. Correct the defects and sell the radios at the regular price. C. Sell the radios as they are because repairing them will cause their total cost to exceed their selling price. D. Sell 5,000 radios to the salvage company and repair the remainder. E. Throw the radios away. 50. Product A requires 5 machine hours per unit to be produced, Product B requires only 3 machine hours per unit, and the company's productive capacity is limited to 240,000 machine hours. Product A sells for $16 per unit and has variable costs of $6 per unit. Product B sells for $12 per unit and has variable costs of $5 per unit. Assuming the company can sell as many units of either product as it produces, the company should: A. Produce only Product A. B. Produce only Product B. C. Produce equal amounts of A and B. D. Produce A and B in the ratio of 62.5% A to 37.5% B. E. Produce A and B in the ratio of 40% A and 60% B. 51. Alpha Co. can produce a unit of Beta for the following

costs: An outside supplier offers to provide Alpha with all the Beta units it needs at $60 per unit. If Alpha buys from the supplier, Alpha will still incur 40% of its overhead. Alpha should: A. Buy Beta since the relevant cost to make it is $72. B. Make Beta since the relevant cost to make it is $56. C. Buy Beta since the relevant cost to make it is $48. D. Make Beta since the relevant cost to make it is $48. E. Buy Beta since the relevant cost to make it is $56. 52. Marcus processes four different products that can either be sold as is or processed further.

Listed below are sales and additional cost data: Which product(s) should not be processed further? A. Acta. B. Corda. C. Fando. D. Limo. E. None of the products should be processed further.

53. Marsden manufactures a cat food product called Special Export. Marsden currently has 10,000 bags of Special Export on hand. The variable production costs per bag are $1.80 and total fixed costs are $10,000. The cat food can be sold as it is for $9.00 per bag or be processed further into Prime Cat Food and Feline Surprise at an additional $2,000 cost. The additional processing will yield 10,000 bags of Prime Cat Food and 3,000 bags of Feline Surprise, which can be sold for $8 and $6 per bag, respectively. The net advantage (incremental income) of processing Special Export further into Prime and Feline Surprise would be: A. $98,000. B. $96,000. C. $8,000. D. $6,000. E. $2,000. 54. Marsden manufactures a cat food product called Special Export. Marsden currently has 10,000 bags of Special Export on hand. The variable production costs per bag are $1.80 and total fixed costs are $10,000. The cat food can be sold as it is for $9.00 per bag or be processed further into Prime Cat Food and Feline Surprise at an additional $2,000 cost. The additional processing will yield 10,000 bags of Prime Cat Food and 3,000 bags of Feline Surprise, which can be sold for $8 and $6 per bag, respectively. If Special Export is processed further into Prime Cat Food and Feline Surprise, the total gross profit would be: A. $68,000. B. $78,000. C. $96,000. D. $98,000. E. $100,000. 55. Parker Plumbing has received a special one-time order for 1,500 faucets (units) at $5 per unit. Parker currently produces and sells 7,500 units at $6.00 each. This level represents 75% of its capacity. Production costs for these units are $4.50 per unit, which includes $3.00 variable cost and $1.50 fixed cost. To produce the special order, a new machine needs to be purchased at a cost of $1,000 with a zero salvage value. Management expects no other changes in costs as a result of the additional production. Should the company accept the special order? A. No, because additional production would exceed capacity. B. No, because incremental costs exceed incremental revenue. C. Yes, because incremental revenue exceeds incremental costs. D. Yes, because incremental costs exceed incremental revenues. E. No, because the incremental revenue is too low. 56. Parker Plumbing has received a special one-time order for 1,500 faucets (units) at $5 per unit. Parker currently produces and sells 7,500 units at $6.00 each. This level represents 75% of its capacity. Production costs for these units are $4.50 per unit, which includes $3.00 variable cost and $1.50 fixed cost. To produce the special order, a new machine needs to be purchased at a cost of $1,000 with a zero salvage value. Management expects no other changes in costs as a result of the additional production. If Parker wishes to earn $1,250 on the special order, the size of the order would need to be: A. 4,500 units. B. 2,250 units. C. 1,125 units. D. 625 units. E. 300 units.

57. Textel is thinking about having one of its products manufactured by a subcontractor.

Currently, the cost of manufacturing 1,000 units follows: If Textel can buy 1,000 units from a subcontractor for $100,000, it should: A. Make the product because current factory overhead is less than $100,000. A.Make the product because the cost of direct material plus direct labor of manufacturing is less than $100,000. B. Buy the product because the total incremental costs of manufacturing are greater than $100,000. C. Buy the product because total fixed and variable manufacturing costs are greater than $100,000. D. Make the product because factory overhead is a sunk cost. 58. A company has the choice of either selling 1,000 defective units as scrap or rebuilding them. The company could sell the defective units as they are for $4.00 per unit. Alternatively, it could rebuild them with incremental costs of $1.00 per unit for materials, $2.00 per unit for labor, and $1.50 per unit for overhead, and then sell the rebuilt units for $8.00 each. What should the company do? A. Sell the units as scrap. B. Rebuild the units. C. It does not matter because both alternatives have the same result. D.Neither sell nor rebuild because both alternatives produce a loss. Instead, the company should store the units permanently. E. Throw the units away. 59. Thompson Company had the following results of operations for the past

year: A foreign company (whose sales will not affect Thompson's market) offers to buy 4,000 units at $7.50 per unit. In addition to variable manufacturing costs, selling these units would increase fixed overhead by $600 and selling and administrative costs by $300. If Thompson accepts the offer, its profits will: A. Increase by $30,000. B. Increase by $6,000. C. Decrease by $6,000. D. Increase by $5,200. E. Increase by $4,300. 60. 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. 61. 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

62. Coffer Co. is analyzing two projects for the future. Assume that only one project can be

selected. 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. 63. The time expected to pass before the net cash flows from an investment would return its initial cost is called the: A. Amortization period. B. Payback period. C. Interest period. D. Budgeting period. E. Discounted cash flow period. 64. 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. 65. A company is considering the purchase of a new piece of equipment for $90,000. Predicted annual cash inflows from this investment are $36,000 (year 1), $30,000 (year 2), $18,000 (year 3), $12,000 (year 4) and $6,000 (year 5). The payback period is: A. 4.50 years. B. 4.25 years. C. 3.50 years. D. 3.00 years. E. 2.50 years. 66. A disadvantage of using the payback period to compare investment alternatives is that: A. It ignores cash flows beyond the payback period. B. It includes the time value of money. C. It cannot be used when cash flows are not uniform. D. It cannot be used if a company records depreciation. E. It cannot be used to compare investments with different initial investments. 67. A company is considering the purchase of a new machine for $48,000. Management predicts that the machine can produce sales of $16,000 each year for the next 10 years. Expenses are expected to include direct materials, direct labor, and factory overhead totaling $8,000 per year plus depreciation of $4,000 per year. The company's tax rate is 40%. What is the payback period for the new machine? A. 3.0 years. B. 6.0 years. C. 7.5 years. D. 12.0 years. E. 20.0 years.

68. A company is planning to purchase a machine that will cost $24,000, have a six-year life, and be depreciated over a three-year period with no salvage value. The company expects to sell the machine's output of 3,000 units evenly throughout each year. A projected income statement for each year of the asset's life appears below. What is the payback period for this machine?

A. B. C. D. E.

24 years. 12 years. 6 years. 4 years. 1 year.

69. A company is planning to purchase a machine that will cost $24,000, have a six-year life, and be depreciated over a three-year period with no salvage value. The company expects to sell the machine's output of 3,000 units evenly throughout each year. A projected income statement for each year of the asset's life appears below. What is the accounting rate of return for this machine?

A. B. C. D. E.

33.3%. 16.7%. 50.0%. 8.3%. 4%.

70. After-tax net income divided by the annual average investment in an investment, is the: A. Net present value rate. B. Payback rate. C. Accounting rate of return. D. Earnings from investment. E. Profit rate. 71. A company buys a machine for $60,000 that has an expected life of 9 years and no salvage value. The company anticipates a yearly net income of $2,850 after taxes of 30%, with the cash flows to be received evenly throughout each year. What is the accounting rate of return? A. 2.85%. B. 4.75%. C. 6.65%. D. 9.50%. E. 42.75%.

72. Monterey Corporation is considering the purchase of a machine costing $36,000 with a 6-year useful life and no salvage value. Monterey uses straight-line depreciation and assumes that the annual cash inflow from the machine will be received uniformly throughout each year. In calculating the accounting rate of return, what is Monterey's average investment? A. $6,000. B. $7,000. C. $18,000. D. $21,000. E. $36,000. 73. Beyer Corporation is considering buying a machine for $25,000. Its estimated useful life is 5 years, with no salvage value. Beyer anticipates annual net income after taxes of $1,500 from the new machine. What is the accounting rate of return assuming that Beyer uses straight-line depreciation and that income is earned uniformly throughout each year? A. 6.0%. B. 8.0%. C. 8.5%. D. 10.0%. E. 12.0%. 74. The accounting rate of return is calculated as: A. The after-tax income divided by the total investment. B. The after-tax income divided by the annual average investment. C. The cash flows divided by the annual average investment. D. The cash flows divided by the total investment. E. The annual average investment divided by the after-tax income. 75. The following data concerns a proposed equipment

purchase: Assuming that net cash flows are received evenly throughout the year, the accounting rate of return is: A. 62.3%. B. 32.0%. C. 15.0%. D. 7.7%. E. 5.0%. 76. An estimate of an asset's value to the company, calculated by discounting the future cash flows from the investment at an appropriate rate and then subtracting the initial cost of the investment, is known as: A. Annual net cash flows. B. Rate of return on investment. C. Net present value. D. Payback period. E. Unamortized carrying value. 77. Which of the following cash flows is not considered when using the net present value method? A. Future cash inflows. B. Future cash outflows. C. Past cash outflows. D. Non-uniform cash inflows. E. All of these are considered.

78. Which one of the following methods considers the time value of money in evaluating alternative capital expenditures? A. Accounting rate of return. B. Net present value. C. Payback period. D. Cash flow method. E. Return on average investment. 79. The hurdle rate is often set at: A. The rate the company could earn if the investment were placed in the bank. B. The company's cost of capital. C. 10% above the IRR of current projects. D. 10% above the ARR of current projects. E. The rate at which the company is taxed on income. 80. Daniels Corporation is considering the purchase of new equipment costing $30,000. The projected annual after-tax net income from the equipment is $1,200, after deducting $10,000 for depreciation. The revenue is to be received at the end of each year. The machine has a useful life of 3 years and no salvage value. Daniels requires a 12% return on its investments. The present value of an annuity of 1 for different

periods follows: What is the net present value of the machine? A. $24,018. B. $(3,100). C. $30,000. D. $26,900. E. $(29,520). 81. The following present value factors are provided for use in this

problem. Norman Co. wants to purchase a machine for $40,000, but needs to earn an 8% return. The expected yearend net cash flows are $12,000 in each of the first three years, and $16,000 in the fourth year. What is the machine's net present value (round to the nearest whole dollar)?

A. $(9,075). B. $2,685. C. $42,685. D. $(28,240). E. $52,000.

82. Saxon Manufacturing is considering purchasing two machines. Each machine costs $9,000 and will

produce cash flows as follows: Saxon Manufacturing uses the net present value method to make the decision, and it requires a 15% annual return on its investments. The present value factors of 1 at 15% are: 1 year, 0.8696; 2 years, 0.7561; 3 years, 0.6575. Which machine should Saxon purchase? A. Only Machine A is acceptable. B. Only Machine B is acceptable. C. Both machines are acceptable, but A should be selected because it has the greater net present value. D. Both machines are acceptable, but B should be selected because it has the greater net present value. E. Neither machine is acceptable. 83. A company is considering the purchase of new equipment for $45,000. The projected after-tax net income is $3,000 after deducting $15,000 of depreciation. The machine has a useful life of 3 years and no salvage value. Management of the company requires a 12% return on investment. The present value of an annuity

of 1 for various periods follows: What is the net present value of this machine assuming all cash flows occur at year-end? A. $(1,768) B. $3,000 C. $15,000 D. $18,000 E. $43,232 84. A company can buy a machine that is expected to have a three-year life and a $30,000 salvage value. The machine will cost $1,800,000 and is expected to produce a $200,000 after-tax net income to be received at the end of each year. If a table of present values of 1 at 12% shows values of 0.8929 for one year, 0.7972 for two years, and 0.7118 for three years, what is the net present value of the cash flows from the investment, discounted at 12%? A. $118,855 B. $583,676 C. $629,788 D. $705,391 E. $1,918,855 85. The rate that yields a net present value of zero for an investment is the: A. Internal rate of return. B. Accounting rate of return. C. Net present value rate of return. D. Zero rate of return. E. Payback rate of return.

86. A company is considering a 5-year project. The company plans to invest $60,000 now and it forecasts cash flows for each year of $16,200. The company requires a hurdle rate of 12%. Calculate the internal rate of return to determine whether it should accept this project. Selected factors for a present value of an

annuity of 1 for five years are shown below: A. The project should be accepted. B. The project should be rejected because it earns more than 10%. C. The project earns more than 10% but less than 12%. If the hurdle rate is 12%, the project should be rejected. D. Only 9% is acceptable. E. Only 10% is acceptable. 87. Axle Company can produce a product that incurs the following costs per unit: direct materials, $10; direct labor, $24, and overhead, $16. An outside supplier has offered to sell the product to Axle for $45. If Axle buys from the supplier, it will still incur 45% of its overhead cost. Compute the net incremental cost or savings of buying. A. $4.00 savings per unit. B. $4.00 cost per unit. C. $2.20 cost per unit. D. $3.80 cost per unit. E. $2.20 savings per unit. 88. Barnes manufactures a specialty food product that can currently be sold for $22 per unit and has 20,000 units on hand. Alternatively, it can be further processed at a cost of $12,000 and converted into 12,000 units of Exceptional and 6,000 units of Premium. The selling price of Exceptional and Premium are $30 and $20, respectively. The incremental net income of processing further would be: A. $40,000. B. $28,000. C. $18,000. D. $44,000. E. $12,000. 89. Trescott Company had the following results of operations for the past

year: A foreign company (whose sales will not affect Trescott's market) offers to buy 3,000 units at $17.00 per unit. In addition to variable manufacturing costs, selling these units would increase fixed overhead by $500 and selling and administrative costs by $1,000. If Trescott accepts the offer, its profits will: A. Decrease by $4,500. B. Increase by $4,500. C. Decrease by $300. D. Increase by $13,500. E. Increase by $15,000. 90. Sherman Company can sell all of its products A and Z that it can produce, but it has limited production capacity. It can produce 6 units of A per hour or 10 units of Z per hour, and it has 20,000 production hours available. Contribution margin per unit is $12 for A and $10 for Z. What is the most profitable sales mix for this company? A. 84,000 units of A and 60,000 units of Z. B. 48,000 units of A and 80,000 units of Z. C. 60,000 units of A and 100,000 units of Z. D. 120,000 units of A and 0 units of Z. E. 0 units of A and 200,000 units of Z.

91. A new manufacturing machine is expected to cost $286,000, have an eight-year life, and a $30,000 salvage value. The machine will yield an annual incremental after-tax income of $35,000 after deducting the straight-line depreciation. Compute the payback period for the purchase. A. 8.7 years. B. 3.8 years. C. 4.3 years. D. 7.3 years. E. 5.4 years. 92. A new manufacturing machine is expected to cost $286,000, have an eight-year life, and a $30,000 salvage value. The machine will yield an annual incremental after-tax income of $35,000 after deducting the straight-line depreciation. Compute the accounting rate of return for the investment. A. 22.2%. B. 23.4%. C. 46.9%. D. 12.2%. E. 24.5%. 93. Eagle Company is considering the purchase of an asset for $100,000. It is expected to produce the following net cash flows. The cash flows occur evenly throughout each year. Compute the payback period for this investment. (Round to two decimal places.)

A. B. C. D. E.

2.85 years. 2.57 years. 3.00 years. 2.50 years. 3.62 years.

94. A machine costs $180,000 and is expected to yield an after-tax net income of $10,800 each year. Management estimates the machine will have a ten-year life, a $20,000 salvage value, and straight-line depreciation is used. Compute the accounting rate of return for the investment. A. 12.0%. B. 26.8%. C. 11.8%. D. 10.8%. E. 28.8%. 95. Edgar Company is considering the purchase of new equipment costing $80,000. The projected annual after-tax net income from the equipment is $10,200, after deducting $20,000 for depreciation. The revenue is to be received at the end of each year. The machine has a useful life of 4 years and no salvage value. Edgar requires a 10% return on its investments. The present value of an annuity of 1 and present value of an annuity for different periods is presented below. Compute the net present value of the

machine. A. $(15,73 1). B. $(4,89 6). C. $15,73 1.

96. Edgar Company is considering the purchase of new equipment costing $80,000. The projected net cash flows are $35,000 for the first two years and $30,000 for years three and four. The revenue is to be received at the end of each year. The machine has a useful life of 4 years and no salvage value. Edgar requires a 10% return on its investments. The present value of an annuity of 1 and present value of an annuity for different periods is presented below. Compute the net present value of the

machine. A. $(15,731). B. $(4,896). C. $15,731. D. $4,896. E. $23,775. 97. Eagle Company is considering the purchase of an asset for $100,000. It is expected to produce the following net cash flows. The cash flows occur evenly throughout each year. Compute the break-even time (BET) period for this investment. (Round to two decimal places.)

A. 2.85 years. B. 2.57 years. C. 3.17 years. D. 2.98 years. E. 3.62 years. 98. Presented below are terms preceded by letters a through g and followed by a list of definitions 1 through 7. Match the letter of the term with the definition. Use the space provided preceding each definition. 1. Internal Rate A discount rate that results in a net present value of of Return zero. 2. Hurdle Rate Cash inflows minus cash outflows for the period. __ __ __ __

__

3. Net Cash Flow 4. Capital Budgeting

A minimum acceptable rate of return. __ __ The time expected to pass before the net cash flows from an investment equals its initial cost.

5. Net Present Value Annual after-tax net income divided by annual average investment. __ 6. Payback Period A process of analyzing alternative long-term _ investments. _

__

7. Accounting Rate of Return

__ Initial cost of an investment subtracted from discounted future cash flows from the investment. __

99. Presented below are terms preceded by letters a through f and followed by a list of definitions 1 through 6. Match the letter of the terms with the definitions. Use the space provided preceding each definition. 1. Sunk A cost that requires a current outlay of cash. cost _ _ _ _

__

2. Opp ortunity cost A rate used to evaluate the acceptability of an investment; equals the after-tax periodic income divided by the average investment in the asset. _ _ _ 2. Accou nting rate of return An estimate of an asset's value to the company; calculated 2. O u t - of-pocket cost by discounting the future cash flows from the investment at _ a satisfactory rate and then subtracting the initial cost of the _ investment. _ _ A cost that cannot be avoided or changed in any way because it arises from past decision; irrelevant to current and future _ decisions. _ _ _ 5.Ne An additional cost incurred only if a particular action is taken. t pres ent

_

The potential benefits of one alternative that are lost by choosing an alternative course of action. _ _ _ 100.What is capital budgeting? Why are capital budgeting decisions often difficult and risky?

6. Incre ment al

_ _ _

101.Briefly describe the time value of money. Why is the time value of money important in capital budgeting?

102.In using the internal rate of return method, management must consider a hurdle rate in making its decisions. What is a hurdle rate? What factors does management have to consider in selecting a hurdle rate?

103.Identify the five steps involved in managerial decision making.

104.Good management accounting indicates that projects be evaluated using relevant data. In choosing among alternatives, what factors (considerations) are relevant?

105.How does the calculation of break-even time (BET) differ from the calculation of payback period (PBP)?

106.Briefly describe both the payback period method and the net present value method of comparing investment alternatives.

107.When making capital budgeting decisions, companies usually prefer shorter payback periods. Explain why shorter payback periods are desirable.

108.What is one advantage and one disadvantage of using the accounting rate of return to evaluate investment alternatives?

109.You have evaluated three projects using the net present value (NPV) method. How would you decide which one of the projects to select?

110. Identify at least three reasons for managers to favor the internal rate of return (IRR) over other capital budgeting approaches.

11 1.For each of the capital budgeting methods listed below, place an X in the correct column, indicating the measurement basis of each, the ability to make comparison among projects, and whether each method reflects or ignores the time value of

money.

1 12.A company inadvertently produced 6,000 defective portable CD players. The CD players cost $20 each to be manufactured. A salvage company will purchase the defective units as they are for $16 each. The production manager reports that the defects can be corrected for $9 per unit, enabling the company to sell them at the regular price of $30.00. The repair operations would not affect other production operations. Prepare an analysis that shows which action should be taken.

113 .A company manufactures two products. Each unit of product X requires 10 machine hours and each unit of product Y requires 4 machine hours. The company's productive capacity is limited to 180,000 machine hours. Each unit of product X sells for $15 and has variable costs of $7. Each unit of product Y sells for $8 and has variable costs of $3. If the company can sell all that it produces of both products, what should the sales mix be?

1 14.Fleming Company had the following results of operations for the past

year: A foreign company (whose sales will not affect Fleming's regular sales) offers to buy 2,000 units at $5.00 per unit. In addition to variable manufacturing costs, there would be shipping costs of $1,200 in total on these units. Should Fleming take this order? Explain.

1 15.A company produces three different products that all require processing on the same machines. There are only 27,000 machine hours available in each year. Production information for each product

is: Required: (1) Determine the preferred sales mix if there are no market constraints on any of the products. (2) Determine the preferred sales mix if the demand is limited to 5,000 units for each product. (3) Determine the preferred sales mix if the demand is limited to 3,000 units for each product.

1 16.A company puts four products through a common production process. This process costs $100,000 each year. The four products can be sold when they emerge from this process at the "splitoff point", or processed further and then sold. Data about the four products for the coming period

are: Determine which products should be sold at the split-off point and which should be processed further.

1 17.A company has just received a special, one-time order for 1,000 units. Producing the order will have no effect on the production and sales of other units. The buyer's name will be stamped on each unit, at a total cost of $2,000. Normal cost data, excluding stamping,

follows: What selling price per unit will this company require to earn $3,000 on the order?

11 8.Jorgensen Department Store has three departments: Clothing, Toys, and Jewelry. The most recent income statement, showing the total operating profit and departmental results is shown below:

Based on this income statement, management is planning on eliminating the hardware department, as it is generating a net loss. If the hardware department is eliminated, the toy department will expand to fill the space, but sales will not change in total, nor will direct expenses. None of the allocated expenses will be avoided, but they will be reallocated. Clothing will be allocated $200,000 of these expenses, and Toys will be allocated $150,000 of these expenses. Prepare a new income statement for Jorgensen Department Store, showing the results if the Hardware Department is eliminated. Should the Hardware Department be eliminated?

11 9.Peters, Inc. sells a single product and reports the following results from sales of 100,000

units: A foreign company wants to purchase 15,000 units. However, they are willing to pay only $36 per unit for this one-time order. They also agree to pay all freight costs. To fill the order, Peters will incur normal production costs. Total fixed overhead will have to be increased by $60,000 to pay for equipment rentals and insurance. No additional administrative costs (variable or fixed) will be incurred in association with this special order. Required: (1) Should Peters accept the order if it does not affect regular sales? Explain. (2) Assume that Peters can accept the special order only by giving up 5,000 units of its normal sales. Should Peters accept the special order under these circumstances?

120.A company is planning to introduce a new portable TV to its existing product line. Management must decide whether to make the TV case or buy it from an outside supplier. The lowest outside price is $100. If the case is produced internally, the company will have to purchase new equipment that will yield annual depreciation of $130,000. The company will also need to rent a new production facility at $200,000 a year. At 20,000 cases per year, a preliminary analysis of production costs shows the

following: Required: (1) Determine whether the company should make the cases or buy them from the outside supplier. (2) What decision should be made if only 15,000 cases are needed? (3) What other factors, besides cost, should the company consider?

121.A company must decide between scrapping or rebuilding units that do not pass inspection. The company has 15,000 such units that cost $6 per unit to manufacture. The units were built to satisfy a special order, which must still be satisfied if the defective units are scrapped. The units can be sold as scrap for $2.50 each or they can be reworked for $4.50 each and sold for the full price of $9.00 each. If the units are sold as scrap, the company will have to build 15,000 replacement units and sell them at the full price. Required: (1) What is the net return from selling the units as scrap? (2) What is the net return from reworking and selling the units? (3) Should the company sell the units as scrap or rework them?

122.Bower Co. is reviewing a capital investment of $50,000. This project's projected cash flows over a fiveyear period are estimated at $20,000 each year. Required: (a)Calculate the payback period. (b)Calculate the break-even time. Assume a 12% hurdle rate and use the table

below: (c) Using the results in (a) and (b), make a recommendation for the project.

123.A company is considering purchasing a machine for $75,000. The machine is expected to generate a net after-tax income of $11,250 per year. Depreciation expense would be $7,500. What is the payback period for this machine?

124.A company is trying to decide which of two new product lines to introduce in the coming year. The predicted revenue and cost data for each product line

follows: The company has a 30% tax rate, it uses the straight-line depreciation method, and it predicts that cash flows will be spread evenly throughout each year. Calculate each product's payback period. If the company requires a payback period of three years or less, which, if either, product should be chosen?

125.A company is considering a proposal to invest $30,000 in a project that would provide the following net

cash flows: Compute the project's payback period.

126.A company produces two boat models, Montauk and Orient. Both products are being considered for major investment projects next year. Relevant data

follow: Required: Use the payback period to evaluate these two investment projects.

127.A company is evaluating the purchase of a machine for $900,000 with a six-year useful life and no salvage value. The company uses straight-line depreciation and it assumes that the annual net cash flow from using the machine will be received uniformly throughout each year. In calculating the accounting rate of return, what is the company's average investment?

128.A company purchases a machine for $1,000,000. The machine has an expected life of 9 years and no salvage value. The company anticipates a yearly net income of $60,000 after taxes of 30% to be received uniformly throughout each year. What is the accounting rate of return?

129.A company can buy a machine that is expected to have a three-year life and a $30,000 salvage value. The machine will cost $1,800,000 and is expected to produce a $200,000 after-tax net income to be received at the end of each year. If a table of present values of 1 at 12% shows values of 0.8929 for one year, 0.7972 for two years, and 0.7118 for three years, what is the net present value of the cash flows from the investment, discounted at 12%?

130.A company is considering two projects, Project A and Project B. The following information is available for each project: Calculate the profitability index for each project. Based on the profitability index, which project should the company pursue and why?

131.A company is considering the purchase of new equipment for $45,000. The projected after-tax net income is $3,000 after deducting $15,000 of depreciation. The machine has a useful life of 3 years and no salvage value. Management of the company requires a 12% return on investment. The present value of an annuity

of 1 for various periods follows: What is the net present value of this machine assuming all cash flows occur at year-end?

132.A company is trying to decide which of two new product lines to introduce in the coming year. The company requires a 12% return on investment. The predicted revenue and cost data for each product line

follows: The company has a 30% tax rate and it uses the straight-line depreciation method. The present value of an annuity of 1 for 5 years at 12% is 3.6048. Compute the net present value for each piece of equipment under each of the two product lines. Which, if either of these two investments is acceptable?

133.A company is considering two alternative investment opportunities, each of which requires an initial cash outlay of $110,000. The expected net cash flows from the two projects

follow: Required: (1) Based on a comparison of their net present values, and assuming the same discount rate (greater than zero) is required for both projects, which project is the better investment? (Check one answer.) ________________Project A ________________Project Z The projects are equally desirable (2) Use the table values below to find the net present value of the cash flows associated with Project A,

discounted at 12%:

134.A company has a decision to make between two investment alternatives. The company requires a 10% return on investment. Predicted data is provided

below: The present value of an annuity for 6 years at 10% is 4.3553. This company uses straight-line depreciation. Required: (a) Calculate the net present value for each investment. (b) Which investment should this company select? Explain.

135.A company is considering a 5-year project. It plans to invest $60,000 now and it forecasts cash flows for each year of $16,200. The company requires a hurdle rate of 12%. Calculate the internal rate of return to determine whether it should accept this project. Selected factors for a present value of an annuity of 1 for five years are shown below:

136.Casco Company is considering the purchase of equipment that would allow the company to add a new product to its line. The equipment is expected to cost $280,000 with a 7-year life, no salvage value, and will be depreciated using straight-line depreciation. The expected annual income related to this equipment follows. Compute the (a) payback period and (b) accounting rate of return for this equipment.

137.Braybar Company is deciding between two projects. Each project requires an initial investment of $350,000. The projected net cash flows for the two projects are listed below. The revenue is to be received at the end of each year. Braybar requires a 10% return on its investments. The present value of an annuity of 1 and present value of an annuity factors for 10% are presented below. Use net present value to determine which project should be pursued and explain why.

138.A company inadvertently produced 3,000 defective products. The product cost $15 each to be manufactured and normally sells for $35 each. A salvage company will purchase the defective units as they are for $12 each. The production manager reports that the defects can be corrected for $5 per unit, enabling the company to sell them at a discounted price of $22.00. The repair operations would not affect other production operations. Prepare an analysis that shows which action should be taken.

139.Sherman Company can sell all of product A that it produces but only 160,000 units of Z and it has limited production capacity. It can produce 6 units of A per hour or 10 units of Z per hour, and it has 30,000 production hours available. Contribution margin per unit is $12 for A and $10 for Z. What is the most profitable sales mix for this company?

140.Fields Company currently manufactures one of its parts at a cost of $3.25 per unit. This cost is based on a normal production rate of 50,000 units. Variable costs are $2.10 per unit, fixed costs related to making this part are $40,000 per year, and allocated fixed costs are $45,000 per year. Allocated fixed costs are unavoidable whether the company makes or buys the part. Fields is considering buying the part from a supplier for a quoted price of $2.80 per unit guaranteed for a three-year period. Should the company continue to manufacture the part, or should it buy the part from the outside supplier? Support your answer with analyses.

141.

is the process of analyzing alternative long-term investments and deciding which assets to acquire or sell.

142.The minimum acceptable rate of return on an investment is called the________________. 143.Relevant costs are also known as .

144.An requires a future outlay of cash and is relevant for current and future decision making. 145.An is the potential benefit lost by taking a specific action when two or more alternative choices are available. 146.A arises from a past decision and cannot be avoided or changed; it is irrelevant to future decisions. 147.In this chapter, you examined several short-term managerial decision tasks. Identify (list) any three of these types of decision tasks:

148.A capital budgeting method that considers how quickly a project recovers costs is known as . An enhancement to this method that considers the time value of money is called . 149.In evaluating capital budgeting alternatives, there are two primary methods that do not consider the time value of money. These methods are and____________. There are also two primary methods that consider the time value of money; these are and . 150.The is computed by dividing a project's after-tax net income by the average amount invested in it. 151. The is computed by discounting the future net cash flows from the investment at the project's required rate of return and then subtracting the initial amount invested. 152.The net present value decision rule requires that when an asset's expected cash flows are discounted at the required rate and yield a positive net present value, the project should be . 153. The investment. is the rate that yields a net present value of zero for an

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B B B B B A A A C C B D E C A B D C E C

28. 29. 30. 31. 32. 33. 34. 35. 36. 37. 38. 39. 40. 41. 42. 43. 44. 45. 46.

47.Internal Rate of Return :: A discount rate that results in a net present value of zero. and Net Cash Flow:: Cash inflows minus cash outflows for the period. and Hurdle Rate :: A minimum acceptable rate of return. and Payback Period:: The time expected to pass before the net cash flows from an investment equals its initial cost. and Accounting Rate of Return :: Annual after-tax net income divided by annual average investment. and Capital Budgeting :: A process of analyzing alternative long-term investments. and Net Present Value :: Initial cost of an investment subtracted from discounted future cash flows from the investment. 48.Out-of-pocket cost :: A cost that requires a current outlay of cash. and Accounting rate of return :: A rate used to evaluate the acceptability of an investment; equals the after-tax periodic income divided by the average investment in the asset. and Net present value :: An estimate of an asset's value to the company; calculated by discounting the future cash flows from the investment at a satisfactory rate and then subtracting the initial cost of the investment. and Sunk cost :: A cost that cannot be avoided or changed in any way because it arises from past decision; irrelevant to current and future decisions. and Incremental cost :: An additional cost incurred only if a particular action is taken. and Opportunity cost:: The potential benefits of one alternative that are lost by choosing an alternative course of action.

49.Capital budgeting is the process of analyzing alternative long-term investments and deciding which assets to acquire and/or sell. Capital budgeting decisions are difficult because they are usually based on predictions about an uncertain future. Since these decisions involve large sums of money committed for long periods of time that may be irreversible, they are also risky. 50.The time value of money means that, typically, a dollar today is worth more than a dollar tomorrow and a dollar tomorrow is worth less than a dollar today. Since capital budgeting decisions are often based on cash flows which will be received in the future, managers often use a process called discounting in order to measure future cash flows in the value of today's dollar. 51.A hurdle rate is a minimum acceptable rate of return. The factors determining a hurdle rate would include the interest rate on borrowed funds, the minimum profit or reward acceptable, and current and predicted tax rates.

(5) Analyze and assess decisions made. (4) Select the preferred course of action; (3) Collect relevant information to evaluate each alternative; (2) Identify alternative courses of action; (1) Define the decision task and goal; 103. The five steps are:

104.Relevant data includes both quantitative as well as qualitative considerations. Quantitative considerations are relevant costs, i.e., avoidable costs and relevant benefits or incremental benefits from choices considered. Qualitative considerations include quality, personnel, impact on present customers, etc. (i.e., non-numerical considerations.) 105.The calculation of BET adjusts cash flows using an appropriate discount rate. PBP does not measure time-adjusted cash flows.The net present value method does consider the time value of money and all future cash flows. Projected cash flows for each investment are discounted to determine the net present value. Under this method, the project with the highest positive net present value would be considered the best choice. 106.The payback period method evaluates alternative investment opportunities based on how quickly each project will recover its initial cost. This method does not consider the time value of money and ignores cash flows after the payback period.

107.Shorter payback periods increase return and reduce risk. The more quickly a company receives cash, the sooner it is available for other purposes. A shorter payback period also improves the company's ability to respond to unanticipated changes and lowers its risk of having to keep an unprofitable investment. 108.An advantage of using the rate of return on the average investment is that it is easy to calculate. A disadvantage of this method is that it does not account for net incomes that are expected to vary from year to year. It also measures the average investment by using book values based on systematic depreciation. These amounts do not necessarily reflect market values. 109.First, determine which projects have a positive NPV and eliminate those with a negative NPV. Then, given the same cost and risk, select the projects with the highest NPV. 110.(1) IRR considers the time value of money; (2) IRR allows for the comparison of dissimilar projects; (3) IRR is easily understood; and (4) IRR explicitly considers the hurdle rate.

Feedback:

111.

Answers will vary

Therefore, since the net return from repairing the units is higher, they should be repaired.

Thus, the company should produce 45,000 units of product Y (180,000/4) and zero units of X.

Feedback: 112. Answers will vary

o To donload download ore more ebooks, ebooks, slides, slides, SM and and TB visit: visit: htp:/donloadslide.blogspot.co http://downloadslide.blogspot.comFeedback: 113. Answers will vary

Thus, since operating income will increase, Fleming should take the order so long as it does not affect regular sales.



Feedback: 115. Answers will vary Sales Mix: In this case, the company should produce 3,000 units of C, 3,000 units of A, and 1,500 units of B. This leaves (13,500 - 7,500) = 6,000 hours. These hours can be used to produce (6,000 hours per unit/4 hours per unit for B) = 1,500 units of B. Of the (27,000 - 13,500) = 13,500 hours left, produce 3,000 units of A. This will use an additional (3,000 x 2.5) = 7,500 hours. (3) If the demand is limited to 3,000 units of each product, produce 3,000 units of C first. This will use (3,000 x 4.5 hours per unit) = 13,500 hours. Sales Mix: The company in this case should produce 5,000 units of C and 1,800 units of A. 4,500 available hours/2.5 hours per unit for A = 1,800 units of A. Of the (27,000 - 22,500) = 4,500 hours left, produce as much A as possible: (2) If the demand is limited to 5,000 units of each product, produce 5,000 units of C first. This will use (5,000 x 4.5 hours per unit) = 22,500 hours. Sales Mix: The company should therefore produce 6,000 units of C and none of the others. 27,000 available hours/4.5 hours per unit for C = 6,000 units of C. (1) If no market constraints exist on any of the products, produce as much C as possible and none of the other products. In general, the company should produce Product C first, then A, and finally B. Specifically:


Sayer: 5,000 lb. x $18/lb. = $90,000 Walker: 5,000 lb. x $36/lb. = $180,000 Talker: 10,000 lb. x $7/lb. = $70,000 Singer: 20,000 lb. x $28/lb. = $560,000 **Sales value at split off: Sayer: 5,000 lb. x $22/lb. = $110,000 Walker: 5,000 lb. x $58/lb. = $290,000 Talker: 10,000 lb. x $28/lb. = $280,000 Singer: 20,000 lb. x $42/lb. = $840,000 *Sales value after further processing:

Feedback: 116. Answers will vary Feedback: 117. Answers will vary

o To donload download ore more ebooks, ebooks, slides, slides, SM and and TB visit: visit: htp:/donloadslide.blogspot.co http://downloadslide.blogspot.comFeedback: 118. Answers will vary Based on this analysis, the Hardware Department should not be eliminated. Overall profits will decline by $20,000.


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(3) The company also should consider such things as quality control, customer reactions, suppliers' dependability, and the availability and training of employees. If only 15,000 cases are needed, the company should purchase them.

If 20,000 cases are needed, the company should produce them.

Feedback:

120.

Answers will vary

(3) The units should be sold as scrap. The company is $15,000 better off if they do so.

(c) If the required payback period is more than 2.5 years, the project is acceptable. If the required break-even time is greater than 3.15 years, the project is acceptable. In addition, the internal rate of return is greater than the 12% hurdle rate. Break-even time = 3 years + (1,962/12,710) = 3.15 years

(b) (a) Payback period = $50,000/$20,000 per year = 2.5 years Feedback: 122. Answers will vary

Feedback:

123.

Answers will vary

Based on the payback period, Product A should be chosen. (B) ($100,000/$3 1,200) = 3.2 years (A) ($75,000/$32,150) = 2.3 years Payback periods: B = $100,000/5 yrs. = $20,000 A = $75,000/5 yrs. = $15,000 *Annual depreciation:

Payback period = 2 years + (12,800/15,000) = 2.85 years


Montauk has a slightly shorter payback period. Orient: Payback period = $380,000/$ 130,000 per year = 2.92 years Payback period = 2 years + ($1 14,000/$ 170,000) = 2.67 years

Feedback: Answers will vary


Feedback: ($900,000 + $0)/2 = $450,000

127.

Answers will vary

Feedback: Accounting rate of return = $60,000/[($ 1,000,000 +$0)/2] = 12% 128. Answers will vary

Feedback:

129.

Answers will vary

Since a higher profitability index suggests a more desirable project, Project B should be selected.

*Annual cash flows = $3,000 + $15,000 = $18,000



Product A is not acceptable since its NPV is less than zero. Product B is acceptable since its NPV is greater than zero. Product B: $130,900 + $300,000 = $430,900 **Product A: $59,500 + $500,000 = $559,500

B $1,500,000/ 5 yrs. = $300,000 A $2,500,000/5 yrs. = $500,000 *Annual depreciation :

Feedback: 132. Answers will vary (2)

(1) Project Z because its cash flows are received earlier than Project A.

(b) Select Investment Y because it has a positive NPV and it is superior to Investment Z.


(a) Feedback: 134. Answers will vary

The present value factor of 3.704 falls between 10% and 12%. This project earns more than 10% but less than 12%. If the hurdle rate is 12%, this project should be rejected. Feedback: Investment/Annual net cash flows = $60,000/$16,200 = 3.704 135. Answers will vary

$46,200/(($280,000 + 0)/2) = 33.0% Accounting rate of return = Annual after-tax net income/annual average investment b. $280,000/$86,200 = 3.25 years Payback period = cost of investment/annual net cash flow Feedback: a. 136. Answers will vary

Both projects have a positive net present value which means that both projects would generate more than a 10% return. However, if only one project can be chosen, it should be Project 2. It provides the higher net present value and also the cash inflows are higher in the first year which means the company would recover the cost of the project sooner.

Because there is an incremental income generated from repairing, they should be repaired.

o To donload download ore more ebooks, ebooks, slides, slides, SM and and TB visit: visit: htp:/donloadslide.blogspot.co http://downloadslide.blogspot.com138. Answers will vary Feedback:

o To donload download ore more ebooks, ebooks, slides, slides, SM and and TB visit: visit: htp:/donloadslide.blogspot.co http://downloadslide.blogspot.comBecause Product Z yields the higher contribution margin per hour, all production should be devoted to producing Product Z first. Since the current market limit for Z is 160,000 units and Z yields the higher contribution margin per hour, all units of Z should be made first. The remaining capacity should be used to produce A, which would result in 84,000 units being produced.


The allocated fixed costs are not relevant to the decision because they will continue whether the part is made or bought. The incremental costs of buying the part are $5,000 less per year than making it. This implies that the company should buy the part.


o To donload download ore more ebooks, ebooks, slides, slides, SM and and TB visit: visit: htp:/donloadslide.blogspot.co http://downloadslide.blogspot.com 141. Capital budgeting 142. 143. 144. 145. 146.Hurdle rate Avoidable costs Out-of-pocket cost Opportunity cost Sunk cost

147. Any three (3) of the following are acceptable: Accepting Additional Business, Make or Buy, Scrap or Rework, Sell or Process Further, Selecting Sales Mix, Eliminate a Segment 148. 149. 150. 151.Payback Period (PBP); Break-even Time (BET) Payback Period; Accounting Rate of Return; Net Present Value and Internal Rate of Return Accounting rate of return Net present value

o To donload download ore more ebooks, ebooks, slides, slides, SM and and TB visit: visit: htp:/donloadslide.blogspot.co http://downloadslide.blogspot.com 152. 153.Acquired or accepted Internal rate of return

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ch25 SummaryCategory AACSB: Analytic AACSB: Communications AICPA BB: Resource Management AICPA FN: Decision Making AICPA FN: Risk Analysis Blooms: Apply Blooms: Remember Blooms: Understand Difficulty: Easy Difficulty: Hard Difficulty: Medium Fundamental - Chapter 25 Learning Objective: A1 Evaluate short-term managerial decisions using relevant costs. Learning Objective: A2 Analyze a capital investment project using break-even time. Learning Objective: C1 Describe the importance of relevant costs for short-term decisions. Learning Objective: P1 Compute payback period and describe its use. Learning Objective: P2 Compute accounting rate of return and explain its use. Learning Objective: P3 Compute net present value and describe its use. Learning Objective: P4 Compute internal rate of return and explain its use. # of Questions 113 40 153 148 5 66 44 43 44 66 43 153 41 7 17 52 2 30 16

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