Question 1

All of the following are factors that may complicate capital investment analysis except

Accepted Answer

Sunk costs are costs that have already been incurred and cannot be recovered, they are not relevant to capital investment analysis as they do not impact future cash flows. A, B, and D are all factors that can complicate capital investment analysis as they may impact future cash flows and the overall financial viability of a project.

Question 2

T-Bone Company is contemplating investing in a new piece of manufacturing machinery. The amount to be invested is $150,000. The present value of the future cash flows is $141,000. Should the company invest in this project?

Accepted Answer

The net present value is calculated by subtracting the present value of the investment from the initial investment. In this case, the net present value is negative ($150,000 - $141,000 = -$9,000), indicating that the project will not generate sufficient returns to cover the cost of the investment. Therefore, T-Bone Company should not invest in this project.

Question 3

The production department is proposing the purchase of an automatic insertion machine. It has identified 3 machines and has asked the accountant to analyze them to determine which of the proposals (if any) meet or exceed the company's policy of a minimum desired rate of return of 10% using the net present value method. Each of the assets has an estimated useful life of 10 years. The accountant has identified the following data:  Which of the investments are acceptable?

Accepted Answer

The answer of The production department is proposing the purchase...

Question 4

Assume in analyzing alternative proposals that Proposal F has a useful life of 6 years and Proposal J has a useful life of 9 years. What is one widely used method to make the net present values of the proposals comparable?

Accepted Answer

To make the net present values (NPVs) of proposals with different useful lives comparable, one widely used method is to adjust the life of the longer proposal to match the shorter one by estimating a residual value at the end of the shorter period. This allows for a fair comparison of the proposals' values over the same time frame.

Question 5

Following is a table for the present value of $1 at compound interest:  Following is a table for the present value of an annuity of $1 at compound interest:  ​
-Using the tables provided, if an investment is made now for $20,000 that will generate a cash inflow of $7,000 a year for the next 4 years, the present value of the investment cash inflows, assuming an earnings rate of 12%, is

Accepted Answer

The present value of an annuity can be calculated using the present value annuity factor, which is found using the formula $\frac{1 - (1 + r)^{-n}}{r}$, where $r$ is the interest rate and $n$ is the number of periods. For a 12% interest rate over 4 years, the present value annuity factor can be looked up or calculated. Multiplying this factor by the annual cash inflow of $7,000 gives the total present value of the investment cash inflows. Without the exact factor provided, the correct answer is based on the calculation or lookup that matches the given options, which is D, $21,259.

Question 6

A company is contemplating investing in a new piece of manufacturing machinery. The amount to be invested is $100,000. The present value of the future cash flows at the company's desired rate of return is $105,000. The IRR on the project is 12%. Which of the following statements is true?

Accepted Answer

The present value of future cash flows ($105,000) is greater than the investment ($100,000), indicating a positive net present value. Since the IRR is 12%, the desired rate of return must be less than 12% for the present value to exceed the investment.

Question 7

All of the following qualitative considerations may influence capital investment analysis except the investment proposal's impact on

Accepted Answer

The time value of money is a quantitative consideration, not a qualitative one, as it involves calculating the present value of future cash flows.

Question 8

Brunette Company is contemplating investing in a new piece of manufacturing machinery. The amount to be invested is $180,000. The present value of the future cash flows generated by the project is $163,000. Should the company invest in this project?

Accepted Answer

CThe company should not invest in the project because the present value of the future cash flows ($163,000) is less than the amount to be invested ($180,000), indicating that the rate of return on the project is less than the desired rate of return. Additionally, the net present value is negative ($17,000), further suggesting that the investment would not meet the company's financial criteria.

Question 9

The management of Dakota Corporation is considering the purchase of a new machine costing $420,000. The company's desired rate of return is 10%. The present value factors for $1 at compound interest of 10% for 1 through 5 years are 0.909, 0.826, 0.751, 0.683, and 0.621, respectively. In addition to the foregoing information, use the following data in determining the acceptability of this investment:  The present value index for this investment is

Accepted Answer

The answer of The management of Dakota Corporation is considering...

Question 10

Which of the following provisions of the Internal Revenue Code can be used to reduce the amount of the income tax expense arising from capital investment projects?

Accepted Answer

The depreciation deduction allows businesses to reduce their taxable income based on the decline in value of their capital assets over time. This can be used to reduce the amount of income tax expense arising from capital investment projects. Deductions for individuals, minimum tax provision, and charitable contributions are not directly related to capital investment projects.

Question 11

All of the following qualitative considerations may influence capital investment analysis except the investment proposal's impact on

Accepted Answer

Sunk costs are costs that have already been incurred and cannot be recovered. They should not influence future investment decisions since they cannot be changed by any future actions.

Question 12

Following is a table for the present value of $1 at compound interest:  Following is a table for the present value of an annuity of $1 at compound interest:  ​
-Using the tables provided, the present value of $15,000 to be received at the end of each of the next 2 years, assuming an earnings rate of 6%, is

Accepted Answer

The present value of $15,000 to be received at the end of each of the next 2 years, assuming an earnings rate of 6%, is $27,495. This can be calculated using the present value formula:PV = FV / (1 + r)^nwhere:PV is the present valueFV is the future valuer is the earnings raten is the number of yearsIn this case, the future value is $15,000, the earnings rate is 6%, and the number of years is 2. Plugging these values into the formula, we get:PV = 15,000 / (1 + 0.06)^2PV = 15,000 / 1.1236PV = $27,495

Question 13

Periods in time that experience increasing price levels are known as periods of

Accepted Answer

Inflation is a period of time where there is a sustained increase in the general level of prices of goods and services in an economy over a period of time. This means that the purchasing power of money decreases, and it takes more money to buy the same amount of goods and services. This is usually caused by an increase in demand or a decrease in supply, leading to an overall rise in prices.

Question 14

Following is a table for the present value of $1 at compound interest:  Following is a table for the present value of an annuity of $1 at compound interest:  ​
-Using the tables provided, the present value of $6,000 to be received at the end of each of the next 4 years, assuming an earnings rate of 10%, is

Accepted Answer

The present value of an annuity can be calculated using the present value of annuity factor for 4 years at 10%, which is approximately 3.169. Multiply this factor by $6,000 to get $19,020.

Question 15

The process by which management allocates available investment funds among competing investment proposals is called

Accepted Answer

The process described is known as capital rationing, which involves limiting the amount of available investment funds and then choosing which investment proposals to fund based on a set of criteria. Investment capital refers to the total amount of funds available for investment, and investment rationing is not a commonly used term in finance. Cost-volume-profit analysis is a tool used to analyze the relationships between costs, sales volume, and profits.

Question 16

Following is a table for the present value of $1 at compound interest:  Following is a table for the present value of an annuity of $1 at compound interest:  ​
-Using the tables provided, the present value of $8,000 to be received 1 year from today, assuming an earnings rate of 12%, is

Accepted Answer

The answer of Following is a table for the present...

Question 17

The production department is proposing the purchase of an automatic insertion machine. It has identified 3 machines, each with an estimated life of 10 years. Which machine offers the best internal rate of return?

Accepted Answer

The answer of The production department is proposing the purchase...

Question 18

A company is contemplating investing in a new piece of manufacturing machinery. The amount to be invested is $100,000. The present value of the future cash flows at the company's desired rate of return is $100,000. The IRR on the project is 12%. Which of the following statements is true?

Accepted Answer

The present value of future cash flows equals the investment amount, indicating the NPV is zero. This occurs when the discount rate equals the IRR, which is 12%.

Question 19

A company is contemplating investing in a new piece of manufacturing machinery. The amount to be invested is $210,000. The present value of the future cash flows is $225,000. The company's desired rate of return used in the present value computations was 12%. Which of the following statements is true?

Accepted Answer

The net present value (NPV) is positive ($225,000 - $210,000 = $15,000), indicating that the project's return exceeds the company's desired rate of return of 12%, hence the internal rate of return (IRR) is more than 12%.

Question 20

Which of the following is not considered a complicating factor in capital investment decisions?

Accepted Answer

Income tax, lease versus purchasing options, and qualitative factors are all considered complicating factors in capital investment decisions. The equal proposal lives, on the other hand, is not considered a complicating factor as it refers to the assumption that all proposals being evaluated have the same expected life.

Quiz 26: Capital Investment Analysis

All of the following are factors that may complicate capital investment analysis except

T-Bone Company is contemplating investing in a new piece of manufacturing machinery. The amount to be invested is $150,000. The present value of the future cash flows is $141,000. Should the company invest in this project?

Assume in analyzing alternative proposals that Proposal F has a useful life of 6 years and Proposal J has a useful life of 9 years. What is one widely used method to make the net present values of the proposals comparable?

A company is contemplating investing in a new piece of manufacturing machinery. The amount to be invested is $100,000. The present value of the future cash flows at the company's desired rate of return is $105,000. The IRR on the project is 12%. Which of the following statements is true?

All of the following qualitative considerations may influence capital investment analysis except the investment proposal's impact on

Brunette Company is contemplating investing in a new piece of manufacturing machinery. The amount to be invested is $180,000. The present value of the future cash flows generated by the project is $163,000. Should the company invest in this project?

Which of the following provisions of the Internal Revenue Code can be used to reduce the amount of the income tax expense arising from capital investment projects?

All of the following qualitative considerations may influence capital investment analysis except the investment proposal's impact on

Periods in time that experience increasing price levels are known as periods of

The process by which management allocates available investment funds among competing investment proposals is called

Following is a table for the present value of $1 at compound interest: Following is a table for the present value of an annuity of $1 at compound interest: -Using the tables provided, the present value of $8,000 to be received 1 year from today, assuming an earnings rate of 12%, is

The production department is proposing the purchase of an automatic insertion machine. It has identified 3 machines, each with an estimated life of 10 years. Which machine offers the best internal rate of return?

A company is contemplating investing in a new piece of manufacturing machinery. The amount to be invested is $100,000. The present value of the future cash flows at the company's desired rate of return is $100,000. The IRR on the project is 12%. Which of the following statements is true?

Which of the following is not considered a complicating factor in capital investment decisions?

Quiz 26: Capital Investment Analysis

All of the following are factors that may complicate capital investment analysis except

T-Bone Company is contemplating investing in a new piece of manufacturing machinery. The amount to be invested is $150,000. The present value of the future cash flows is $141,000. Should the company invest in this project?

Assume in analyzing alternative proposals that Proposal F has a useful life of 6 years and Proposal J has a useful life of 9 years. What is one widely used method to make the net present values of the proposals comparable?

A company is contemplating investing in a new piece of manufacturing machinery. The amount to be invested is $100,000. The present value of the future cash flows at the company's desired rate of return is $105,000. The IRR on the project is 12%. Which of the following statements is true?

All of the following qualitative considerations may influence capital investment analysis except the investment proposal's impact on

Brunette Company is contemplating investing in a new piece of manufacturing machinery. The amount to be invested is $180,000. The present value of the future cash flows generated by the project is $163,000. Should the company invest in this project?

Which of the following provisions of the Internal Revenue Code can be used to reduce the amount of the income tax expense arising from capital investment projects?

All of the following qualitative considerations may influence capital investment analysis except the investment proposal's impact on

Periods in time that experience increasing price levels are known as periods of

The process by which management allocates available investment funds among competing investment proposals is called

Following is a table for the present value of $1 at compound interest: Following is a table for the present value of an annuity of $1 at compound interest: ​ -Using the tables provided, the present value of $8,000 to be received 1 year from today, assuming an earnings rate of 12%, is

The production department is proposing the purchase of an automatic insertion machine. It has identified 3 machines, each with an estimated life of 10 years. Which machine offers the best internal rate of return?

A company is contemplating investing in a new piece of manufacturing machinery. The amount to be invested is $100,000. The present value of the future cash flows at the company's desired rate of return is $100,000. The IRR on the project is 12%. Which of the following statements is true?

Which of the following is not considered a complicating factor in capital investment decisions?

Following is a table for the present value of $1 at compound interest: Following is a table for the present value of an annuity of $1 at compound interest: -Using the tables provided, the present value of $8,000 to be received 1 year from today, assuming an earnings rate of 12%, is