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| 1 | |
_______________ is a long-term project that involves a large sum of funds and that provides expected future benefits. |
| | A) | A balanced scorecard |
| | B) | A master budget |
| | C) | A capital budget |
| | D) | A capital investment |
| | E) | A multicriteria decision model |
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| 2 | |
Which of the following is NOT a contribution that the accountant makes to the capital budgeting process? |
| | A) | Linkage to master budget (planning) |
| | B) | Linkage to the balanced scorecard (control) |
| | C) | Generation of relevant data for investment analysis purposes (decision making) |
| | D) | Conducting of post-audits (control) |
| | E) | All of the above are contributions made by the accountant. |
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| 3 | |
_______________ is a multicriteria decision technique that can combine qualitative and quantitative factors in the overall evaluation of decision alternatives. |
| | A) | The balanced scorecard |
| | B) | The analytic hierarchy process |
| | C) | A capital budget |
| | D) | The capital asset pricing model |
| | E) | None of the above. |
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| 4 | |
What is the proper procedure for handling working capital commitments in a capital budgeting decision? |
| | A) | Show it as a negative cash flow in the project initiation year. |
| | B) | Show it as a positive cash flow in the project initiation year. |
| | C) | Show it as a positive cash flow in the final project disposal year. |
| | D) | Both a and c are correct. |
| | E) | Both b and c are correct. |
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| 5 | |
Cash flows occur at three stages of the capital investment project, in the following sequence: |
| | A) | project consideration, project implementation, project evaluation. |
| | B) | project implementation, project consideration, project termination. |
| | C) | project initiation, project operation, final disposal. |
| | D) | project operation, project evaluation, final disposal. |
| | E) | project reflection, project inception, project operation. |
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| 6 | |
What is the new machine's net present value if the firm has a minimum rate of return of 10% on all investments? |
| | A) | $140,000 |
| | B) | $279,400 |
| | C) | $1,139,700 |
| | D) | $1,200,000 |
| | E) | $1,508,400 |
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| 7 | |
What is the new machine's internal rate of return? |
| | A) | 35% |
| | B) | 6.65% |
| | C) | .25% |
| | D) | 8.14% |
| | E) | .75% |
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| 8 | |
What is the payback period for the new machine? |
| | A) | 7.14 years |
| | B) | 8.33 years |
| | C) | 9.16 years |
| | D) | 10 years |
| | E) | 14.29 years |
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| 9 | |
What is the new machine's average book rate of return? |
| | A) | 6.35% |
| | B) | 7.50% |
| | C) | 8% |
| | D) | 10% |
| | E) | 12% |
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| 10 | |
Results from the net present value (NPV) method and the internal rate of return (IRR) method may differ if projects differ in their: |
| | A) | required initial investment. |
| | B) | cash flow pattern. |
| | C) | cost of capital. |
| | D) | length of useful life. |
| | E) | All the above answers are correct. |
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| 11 | |
_______________ is the process of selectively varying a key input variable. |
| | A) | Sensitivity analysis |
| | B) | Scenario analysis |
| | C) | Monte Carlo simulation |
| | D) | The balanced scorecard |
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| 12 | |
The capital budgeting method(s) that provide(s) consistency between data for budgeting and data for performance evaluation is (are) the: |
| | A) | payback period. |
| | B) | discounted cash flow methods. |
| | C) | unadjusted book rate of return. |
| | D) | All of the above are correct. |
| | E) | Only a and b are correct. |
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| 13 | |
Which of the following capital budgeting methods ignores the time value of money? |
| | A) | Internal rate of return |
| | B) | Present value payback period |
| | C) | Net present value |
| | D) | Accounting rate of return |
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| 14 | |
Research has shown that in "framing" capital investment decisions, sunk costs tend to: |
| | A) | have no discernable impact. |
| | B) | have a slight impact. |
| | C) | have an occasional impact. |
| | D) | have a strong impact. |
| | E) | do any of the above, depending upon the decision to be made. |
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| 15 | |
_______________ is a measure of financial performance designed to approximate an entity's economic profit. |
| | A) | IRR |
| | B) | Payback period |
| | C) | NPV |
| | D) | Accounting rate of return |
| | E) | EVA |
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