Question 1

If a proposed expenditure of $80,000 for a fixed asset with a 4-year life has an annual expected net cash flow and net income of $32,000 and $12,000, respectively, the cash payback period is 4 years.

Accepted Answer

The answer of If a proposed expenditure of $80,000 for...

Question 2

If in evaluating a proposal by use of the net present value method there is an excess of the present value of future cash inflows over the amount to be invested, the rate of return on the proposal exceeds the rate used in the analysis.

Accepted Answer

The answer of If in evaluating a proposal by use...

Question 3

In net present value analysis for a proposed capital investment, the expected future net cash flows are reduced to their present values.

Accepted Answer

The answer of In net present value analysis for a...

Question 4

If in evaluating a proposal by use of the net present value method there is an excess of the present value of future cash inflows over the amount to be invested, the rate of return on the proposal is less than the rate used in the analysis.

Accepted Answer

The answer of If in evaluating a proposal by use...

Question 5

In net present value analysis for a proposed capital investment, the expected future net cash flows are averaged and then reduced to their present values.

Accepted Answer

The answer of In net present value analysis for a...

Question 6

For years one through five, a proposed expenditure of $250,000 for a fixed asset with a 5-year life has expected net income of $40,000, $35,000, $25,000, $25,000, and $25,000, respectively, and net cash flows of $90,000, $85,000, $75,000, $75,000, and $75,000, respectively. The cash payback period is 3 years.

Accepted Answer

The answer of For years one through five, a proposed...

Question 7

A qualitative characteristic that may impact upon capital investment analysis is manufacturing flexibility.

Accepted Answer

The answer of A qualitative characteristic that may impact upon...

Question 8

A qualitative characteristic that may impact upon capital investment analysis is the impact of investment proposals on product quality.

Accepted Answer

The answer of A qualitative characteristic that may impact upon...

Question 9

A series of equal cash flows at fixed intervals is termed an annuity.

Accepted Answer

The answer of A series of equal cash flows at...

Question 10

The expected period of time that will elapse between the date of a capital investment and the complete recovery in cash of the amount invested is called the cash payback period.

Accepted Answer

The answer of The expected period of time that will...

Question 11

A present value index can be used to rank competing capital investment proposals when the net present value method is used.

Accepted Answer

The answer of A present value index can be used...

Question 12

If in evaluating a proposal by use of the net present value method there is a deficiency of the present value of future cash inflows over the amount to be invested, the proposal should be rejected.

Accepted Answer

The answer of If in evaluating a proposal by use...

Question 13

The anticipated purchase of a fixed asset for $400,000, with a useful life of 5 years and no residual value, is expected to yield total net income of $300,000 for the 5 years. The expected average rate of return is 37.5%.

Accepted Answer

The answer of The anticipated purchase of a fixed asset...

Question 14

The internal rate of return method of analyzing capital investment proposals uses the present value concept to compute an internal rate of return expected from the proposals.

Accepted Answer

The answer of The internal rate of return method of...

Question 15

If a proposed expenditure of $70,000 for a fixed asset with a 4-year life has an annual expected net cash flow and net income of $32,000 and $12,000, respectively, the cash payback period is 2.5 years.

Accepted Answer

The answer of If a proposed expenditure of $70,000 for...

Question 16

The expected period of time that will elapse between the date of a capital investment and the complete recovery in cash of the amount invested is called the discount period.

Accepted Answer

The answer of The expected period of time that will...

Question 17

The anticipated purchase of a fixed asset for $400,000, with a useful life of 5 years and no residual value, is expected to yield total net income of $200,000 for the 5 years. The expected average rate of return on investment is 50%.

Accepted Answer

The answer of The anticipated purchase of a fixed asset...

Question 18

If in evaluating a proposal by use of the net present value method there is a deficiency of the present value of future cash inflows over the amount to be invested, the proposal should be accepted.

Accepted Answer

The answer of If in evaluating a proposal by use...

Question 19

The anticipated purchase of a fixed asset for $400,000, with a useful life of 5 years and no residual value, is expected to yield total net income of $200,000 for the 5 years. The expected average rate of return on investment is 25.0%.

Accepted Answer

The answer of The anticipated purchase of a fixed asset...

Question 20

For years one through five, a proposed expenditure of $500,000 for a fixed asset with a 5-year life has expected net income of $40,000, $35,000, $25,000, $25,000, and $25,000, respectively, and net cash flows of $90,000, $85,000, $75,000, $75,000, and $75,000, respectively. The cash payback period is 5 years.

Accepted Answer

The answer of For years one through five, a proposed...

Quiz 26: Capital Investment Analysis

If a proposed expenditure of $80,000 for a fixed asset with a 4-year life has an annual expected net cash flow and net income of $32,000 and $12,000, respectively, the cash payback period is 4 years.

If in evaluating a proposal by use of the net present value method there is an excess of the present value of future cash inflows over the amount to be invested, the rate of return on the proposal exceeds the rate used in the analysis.

In net present value analysis for a proposed capital investment, the expected future net cash flows are reduced to their present values.

If in evaluating a proposal by use of the net present value method there is an excess of the present value of future cash inflows over the amount to be invested, the rate of return on the proposal is less than the rate used in the analysis.

In net present value analysis for a proposed capital investment, the expected future net cash flows are averaged and then reduced to their present values.

A qualitative characteristic that may impact upon capital investment analysis is manufacturing flexibility.

A qualitative characteristic that may impact upon capital investment analysis is the impact of investment proposals on product quality.

A series of equal cash flows at fixed intervals is termed an annuity.

The expected period of time that will elapse between the date of a capital investment and the complete recovery in cash of the amount invested is called the cash payback period.

A present value index can be used to rank competing capital investment proposals when the net present value method is used.

If in evaluating a proposal by use of the net present value method there is a deficiency of the present value of future cash inflows over the amount to be invested, the proposal should be rejected.

The anticipated purchase of a fixed asset for $400,000, with a useful life of 5 years and no residual value, is expected to yield total net income of $300,000 for the 5 years. The expected average rate of return is 37.5%.

The internal rate of return method of analyzing capital investment proposals uses the present value concept to compute an internal rate of return expected from the proposals.

If a proposed expenditure of $70,000 for a fixed asset with a 4-year life has an annual expected net cash flow and net income of $32,000 and $12,000, respectively, the cash payback period is 2.5 years.

The expected period of time that will elapse between the date of a capital investment and the complete recovery in cash of the amount invested is called the discount period.

The anticipated purchase of a fixed asset for $400,000, with a useful life of 5 years and no residual value, is expected to yield total net income of $200,000 for the 5 years. The expected average rate of return on investment is 50%.

If in evaluating a proposal by use of the net present value method there is a deficiency of the present value of future cash inflows over the amount to be invested, the proposal should be accepted.

The anticipated purchase of a fixed asset for $400,000, with a useful life of 5 years and no residual value, is expected to yield total net income of $200,000 for the 5 years. The expected average rate of return on investment is 25.0%.