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Chapter 21 Quiz 4
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1
Working capital, defined as the excess of current assets over current liabilities, often decreases as the result of higher balances in accounts receivable or inventory necessary to support a project:
A)True
B)False
2
A project’s internal rate of return is the amount of time it will take for the cash inflows from the project to accumulate to an amount that covers the original investment:
A)True
B)False
3

Four advantages of the accounting rate of return method, compared with other techniques are:

Screening investment projects
Consistency with financial accounting methods
Consistency with profit-based performance evaluation systems
Consideration of the entire life of the project

A)True
B)False
4
A least-cost decision is a capital expenditure decision where the objective is to maximise the NPV of the costs to be incurred:
A)True
B)False
5

The six stages of the capital expenditure decision process identified by Emmanuel, Otley and Merchant (1990), were:

  1. Project generation
  2. Estimation and analysis of projected cash flows
  3. Progress to approval
  4. Analysis and selection of projects
  5. Implementation of projects
  6. Rating customer satisfaction
A)True
B)False
6
One of the advantages of the net present value method over the internal rate of return is that it is easier to calculate a project’s NPV than its IRR:
A)True
B)False
7
One of the final steps in an analysis of cash flows for a profit-seeking enterprise is to determine the after-tax cash flows associated with the investment projects under consideration:
A)True
B)False





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