Which one of the following risks is least likely to be mitigated by project diversification?\t\u00a0\tA graph of the relationship between financial risk and expected financial reward would show a curve that has a:\t\u00a0\tWhich one of the following identifies the rate of return required by investors to compensate them for deferring current consumption when making an investment?\t\u00a0\tAs the perceived risk of an undertaking increases, what would be the expected effect on the risk-free rate of return and the risk premium rate of return?\t\u00a0\tWhich one of the following approaches to capital project evaluation is primarily concerned with the relative economic ranking of projects?\t\u00a0\tMajor Corp. is considering the purchase of a new machine for $5,000 that will have an estimated useful life of five years and no salvage value. The machine will increase Major’s after-tax cash flow by $2,000 annually for five years. Major uses the straight-line method of depreciation and has an incremental borrowing rate of 10%. The present value factors for 10% are as follows:\t\u00a0\tUsing the payback method, how many years will it take to pay back Major’s initial investment in the machine?\t\u00a0\tWhich one of the following is a strength of the payback method of evaluating an investment project?\t\u00a0\tWhat is the investment’s payback period?\t\u00a0\tCapital budgeting is concerned with capital investments that have which one of the following characteristics?\tA company invested in a new machine that will generate revenues of $35,000 annually for seven years. The company will have annual operating expenses of $7,000 on the new machine. Depreciation expense, included in the operating expenses, is $4,000 per year. The expected payback period for the new machine is 5.2 years. What amount did the company pay for the new machine?\t\u00a0\tWhich one of the following is not a technique or approach for evaluating capital budgeting opportunities?\t\u00a0\tUsing the information above, which one of the following is the payback period in years for this project? (Ignore income tax.)\t\u00a0\tWhich of the following statements is correct regarding the payback method as a capital budgeting technique?\t\u00a0\tWhich of the following statements concerning the discounted payback period approach to project evaluation is\/are correct?\t\u00a0\tWhich of the following statements concerning the discounted payback period method of evaluating capital projects is\/are correct?\t\u00a0\tWhich one of the following is the capital budgeting evaluation approach that determines the number of periods required for the discounted cash inflows of a project to equal the discounted cash outflows?\t\u00a0\tThe discounted payback period approach to project evaluation is better than the payback period approach because\t\u00a0\tA company purchases an item for $43,000. The salvage value of the item is $3,000. The cost of capital is 8%. Pertinent information related to this purchase is as follows:\tWhat is the discounted payback period in years?\t\u00a0\tWhich one of the following methods of evaluating potential capital projects would take into account depreciation expense that was non-deductible for tax purposes?\t\u00a0\tWhich of the following statements concerning the accounting rate of return approach to evaluating capital projects is\/are correct?\t\u00a0\tLin Co. is buying machinery it expects will increase average annual operating income by $40,000. The initial increase in the required investment is $60,000, and the average increase in required investment is $30,000. To compute the accrual accounting rate of return, what amount should be used as the numerator in the ratio?\tPhillips Company is considering the acquisition of a new machine that would cost $66,000, has an expected life of 6 years, and an expected salvage value of $16,000. The company expects the machine to provide annual incremental income before taxes of $7,200. Phillips has a tax rate of 30%. If Phillips uses average values in its calculations, which one of the following will be the average accounting rate of return on the machine?\t\u00a0\tSalem Co. is considering a project that yields annual net cash inflows of $420,000 for years 1 through 5, and net cash inflow of $100,000 in year 6. The project will require an initial investment of $1,800,000. Salem’s cost of capital is 10%. Present value information is present below:\tWhat was Salem’s expected net present value for this project?\t\u00a0\tYarrow Co. is considering the purchase of a new machine that costs $450,000. The new machine will generate net cash flow of $150,000 per year and net income of $100,000 per year for five years. Yarrow’s desired rate of return is 6%. The present value factor for a five-year annuity of $1, discounted at 6%, is 4.212. The present value factor of $1, at compound interest of 6% due in five years, is 0.7473. What is the new machine’s net present value?\t\u00a0\tA corporation is considering purchasing a machine that costs $100,000 and has a $20,000 salvage value. The machine will provide net annual cash inflows of $25,000 per year and has a six-year life. The corporation uses a discount rate of 10%. The discount factor for the present value of a single sum six years in the future is 0.564. The discount factor for the present value of an annuity for six years is 4.355. What is the net present value of the machine?\t\u00a0\tWhich of the following is an advantage of net present value modeling?\t\u00a0\tA project should be accepted if the present value of cash flows from the project is:\t\u00a0\tThe following information pertains to Krel Co.’s computation of net present value relating to a contemplated project:\tDiscounted expected cash inflows $1,000,000\tDiscounted expected cash outflows 700,000\tNet present value is:\t\u00a0\tTam Co. is negotiating for the purchase of equipment that would cost $100,000, with the expectation that $20,000 per year could be saved in after-tax cash costs if the equipment is acquired. The equipment’s estimated useful life is 10 years, with no residual value, and would be depreciated by the straight-line method. Tam’s predetermined minimum desired rate of return is 12%. Present value of an annuity of 1 at 12% for 10 periods is 5.65. Present value of 1 due in 10 periods at 12% is .322.\tNet present value is\t\u00a0\tA project’s net present value, ignoring income tax considerations, is normally affected by the\tSmarti Co. has determined the following data in connection with its evaluation of a capital investment project:\tSmarti uses straight-line depreciation for capital investments of this type. Excerpts from present value tables showed the following:\t\u00a0\tUsing the above information, which one of the following is the present value of total estimated future cash inflows and savings? (Ignore income taxes.)\t\u00a0\tAn investment in a new product will require an initial outlay of $20,000. The cash inflow from the project will be $4,000 a year for the next six years. The payment will be received at the end of each year. What is the net present value of the investment at 8% using the correct factor from below?\t\u00a0\tOak Company bought a machine that they will depreciate on a straight-line basis over an estimated life of seven years. The machine has no salvage value. They expect the machine to generate after-tax net cash inflows from operations of $110,000 in each of the seven years. Oak’s minimum rate of return is 12%. Information on present value factors is as follows:\t\u00a0\tAssuming a positive net present value of $12,000, what was the cost of the machine?\tWhich project would provide the largest after-tax cash inflow?\t\u00a0\tNet present value as used in investment decision-making is stated in terms of which of the following options?\t\u00a0\tThe calculation of depreciation is used in the determination of the net present value of an investment for which of the following reasons?\t\u00a0\tThe decline in the value of the investment should be reflected in the determination of net present value.\t\u00a0\tGiven a 10% discount rate with cash inflows of $3,000 at the end of each year for five years and an initial investment of $11,000, what is the net present value?\tThe discount rate is determined in advance for which of the following capital budgeting techniques?\t\u00a0\tWhich of the following metrics equates the present value of a project’s expected cash inflows to the present value of the project’s expected costs?\t\u00a0\tA client wants to know how many years it will take before the accumulated cash flows from an investment exceeds the initial investment, without taking the time value of money into account. Which of the following financial models should be used?\t\u00a0\tWhich of the following decision-making models equates the initial investment with the present value of the future cash inflows?\t\u00a0\tWhich of the following events would decrease the internal rate of return of a proposed asset purchase?\t\u00a0\tPolo Co. requires higher rates of return for projects with a life span greater than five years. Projects extending beyond five years must earn a higher specified rate of return. Which of the following capital budgeting techniques can readily accommodate this requirement?\t\u00a0\tWhich of the following limitations is common to the calculations of payback period, discounted cash flow, internal rate of return, and net present value?\t\u00a0\tWhich of the following rates is most commonly compared to the internal rate of return to evaluate whether to make an investment?\t\u00a0\tIf income taxes are ignored, which of the following methods of evaluating capital investment projects includes the use of depreciation expense?\t\u00a0\tTam Co. is negotiating for the purchase of equipment that would cost $100,000, with the expectation that $20,000 per year could be saved in after-tax cash costs if the equipment is acquired. The equipment’s estimated useful life is 10 years, with no residual value, and it would be depreciated by the straight-line method. Tam’s predetermined minimum desired rate of return is 12%. Present value of an annuity of 1 at 12% for 10 periods is 5.65. Present value of 1 due in 10 periods at 12% is .322.\tIn estimating the internal rate of return, the factors in the table of present values of an annuity should be taken from the columns closest to\t\u00a0\tIn evaluating the economic feasibility of a capital project, the discount rate (or hurdle rate of return) must be determined in advance when using the:\t\u00a0\tWhich of the following capital budgeting techniques, if any, implicitly assumes that all cash inflows are immediately reinvested to earn a return for the company?\t\u00a0\tWhich of the following phrases defines the internal rate of return on a project?\t\u00a0\tNeu Co. is considering the purchase of capital equipment that has a positive net present value based on Neu’s 12% hurdle rate.\u00a0\tThe internal rate of return would be:\t\u00a0\tWhich of the following characteristics represent an advantage of the internal rate of return technique over the accounting rate of return technique in evaluating a project?\tI. Recognition of the project’s salvage value.\tII. Emphasis on cash flows.\tIII. Recognition of the time value of money.\t\u00a0\tHow are the following used in the calculation of the internal rate of return of a proposed project? Ignore income tax considerations.\t\u00a0\tWhich of the following statements about investment decision models is true?\t\u00a0\tWhen estimating cash flow for use in capital budgeting, depreciation is\t\u00a0\tWhat is an internal rate of return?\t\u00a0\tWhich of the following is a limitation of the profitability index?\t\u00a0\tWhat is the formula for calculating the profitability index of a project?\t\u00a0\tIf it is determined that a project investment is expected to generate $1.20 in present value for each $1.00 invested, which one of the following was most likely used to reach that conclusion?\t\u00a0\tDisco is considering three capital projects that have the following costs and net present values (NPV):\tWhich one of the projects, if any, is not economically feasible?\t\u00a0\tUsing the profitability index, which project, if any, would be ranked as the most desirable?\t\u00a0\tWhich one of the following represents the formula used to calculate the profitability index for ranking projects?\t\u00a0\tWhich one of the following methods of evaluating investment projects is most likely to be least acceptable for making project ranking decisions?\t\u00a0\tWhich of the following methods should be used if capital rationing needs to be considered when comparing capital projects?\t\u00a0\tWhich of the following statements is correct regarding financial decision making?\t\u00a0\tWhich one of the following methods of evaluating investment projects is most likely to be used to rank projects competing for limited capital investment funds?\t\u00a0\tOn August 31, Year 1, Ashe Corp. adopted a plan to accumulate $1,000,000 by September 1, Year 5. Ashe plans to make four equal annual deposits to a fund that will earn interest at 10% compounded annually.\tAshe will make the first deposit on September 1, Year 1. Future value and future amount factors are as follows:\tWhich one of the following would be the amount of annual deposits Ashe should make (rounded)?\t\u00a0\tOn November 1, Year 1, a company purchased a new machine that it does not have to pay for until November 1, Year 3. The total payment on November 1, Year 3 will include both principal and interest. Assuming interest at a 10% rate, the cost of the machine would be the total payment multiplied by what time value of money concept?\t\u00a0\tWhich one of the following kinds of tables most likely would be used to determine the current worth of five equal amounts to be received at the end of each of the next five years.\tPole Co. is investing in a machine with a 3-year life. The machine is expected to reduce annual cash operating costs by $30,000 in each of the first 2 years and by $20,000 in year 3. Present values of an annuity of $1 at 14% are:\tUsing a 14% cost of capital, what is the present value of these future savings?\t\u00a0\tWhich of the following changes would result in the highest present value?\t\u00a0\tWhich one of the following sets of interest (or discount) rates will give the greater present value of $1.00 and greater future value of $1.00?\t\u00a0\tOn June 30, 2012, a company is preparing the cash budget for the third quarter. The collection pattern for credit sales has been 60% in the month of sale, 30% in the first month after sale, and the rest in the second month after sale. Uncollectible accounts are negligible. There are cash sales each month equal to 25% of total sales. The total sales for the quarter are estimated as follows: July, $30,000; August, $15,000; September, $35,000. Accounts receivable on June 30, 2012, were $10,000. What amount would be the projected cash collections for September?\t\u00a0\tThe regression analysis results for ABC Co. are shown as y = 90x + 45. The standard error (S ) is 30 and coefficient of determination (r ) is 0.81.\u00a0 The budget calls for production of 100 units. What is ABC\u2019s estimate of total costs?\t\u00a0\tThe difference between standard hours at standard wage rates and actual hours at standard wage rates is referred to as which of the following types of variances?\t\u00a0\tThe production volume variance is due to\t\u00a0\tWhich of the following scenarios would encourage a company to use short-term loans to retire its ten-year bonds that have five years until maturity?\t\u00a0\tHarvey Co. is evaluating a capital investment proposal for a new machine.\u00a0 The investment proposal shows the following information:\t\u00a0\tIf acquired, the machine will be depreciated using the straight-line method.\u00a0 The payback period for this investment is\t\u00a0\tA company purchases an item for $43,000.\u00a0 The salvage value of the item is $3,000.\u00a0 The cost of capital is 8%. Pertinent information related to this purchase is as follows:\tWhat is the discounted payback period in years?\t\u00a0\tThe Bread Company is planning to purchase a new machine which it will depreciate on a straight-line basis over a 10-year period. A full year\u2019s depreciation will be taken in the year of acquisition. The machine is expected to produce cash flow from operations, net of income taxes, of $3,000 in each of the 10 years.; The accounting (book value) rate of return is expected to be 10% on the initial increase in required investment. The cost of the new machine will be\t\u00a0\tAssume that Trayco\u2019s marginal tax rate is 30% and all cash flows come at the end of the year. In evaluating the decision how is the additional investment in working capital considered?\t\u00a0\tWhich of the following decision-making models equates the initial investment with the present value of the future cash inflows?\t\u00a0\tThe company has $2,000,000 of financing available for new investment projects.\u00a0 The investment project with the highest excess profitability index is\t\u00a0\tWhich one of the following methods of evaluating investment projects is most likely to be used to rank projects competing for limited capital investment funds?\t\u00a0\tAxel Corp. is planning to buy a new machine with the expectation that this investment should earn a discounted rate of return of at least 15%. This machine, which costs $150,000, would yield an estimated net cash flow of $30,000 a year for 10 years, after income taxes. In order to determine the net present value of buying the new machine, Axel should first multiply the $30,000 by which of the following factors?<\/p>\n","protected":false},"excerpt":{"rendered":"
Which one of the following risks is least likely to be mitigated by project diversification? \u00a0 A graph of the relationship between financial risk and expected financial reward would show a curve that has a: \u00a0 Which one of the Read More …<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-199948","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/199948","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/comments?post=199948"}],"version-history":[{"count":0,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/199948\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/media?parent=199948"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/categories?post=199948"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/tags?post=199948"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}