31. When the present value analysis of a proposed investment results in an indication that the proposal has a rate of return greater than the cost of capital, the investment might not be made because:
A. the quantitative analysis indicates that it should not be made.
Need Help Writing an Essay?
Tell us about your assignment and we will find the best writer for your paper.
Write My Essay For MeB. management’s assessment of qualitative factors overrides the quantitative analysis.
C. the timing of the cash flows of the investment will not be as assumed in the present value calculation.
D. post-audits of prior investments have revealed that cash flow estimates were consistently less than actual cash flows realized.
32. Which of the following is not an important qualitative factor to consider in the capital budgeting decision?
A. Regulations that mandate investment to meet safety, environmental, or access requirements.
B. Technological developments within the industry may require new facilities to maintain customers or market share at the cost of lower ROI for a period of time.
C. Commitment to a segment of the business that requires capital investments to achieve or regain competitiveness even though that segment does not have as great an ROI as others.
D. All of the above are important qualitative factors to consider.
33. Which of the following is typically not important when calculating the net present value of a project?
A. Timing of cash flows from the project.
B. Income tax effect of cash flows from the project.
C. Method of financing the project.
D. Amount of cash flows from the project.
34. Depreciation expense is not a cash flow item but it will affect the calculation of which cash flow item?
A. Initial investment.
B. Income taxes.
C. Salvage value.
D. Working capital.
35. In order to calculate the net present value of a proposed investment, it is necessary to know:
A. the cash flows expected from the investment.
B. the net income expected from the investment.
C. the interest rate paid on funds borrowed to make the investment.
D. the cash dividends paid on the stock each year.
36. Discounting a future cash inflow at an 8% discount rate will result in a higher present value than discounting it at a:
A. 7% rate.
B. 8% rate.
C. 9% rate.
D. all of the above.
37. If a project promises to generate a higher rate of return than the firm’s cost of capital, accepting the project will:
A. increase ROI.
B. decrease ROI.
C. increase payback.
D. decrease payback.
38. If the net present value of the investment is $8,510, then:
A. the rate of return is less than the cost of capital.
B. the present value of the cash flows are more than the investment.
C. the cost of capital is higher than the internal rate of return.
D. the present value of the cash flows is $8,510 less than the investment.
39. If the net present value of a proposed investment is positive:
A. the investment not will be made.
B. the cost of capital is higher than the internal rate of return.
C. the cost of capital is positive.
D. the cost of capital is lower than the internal rate of return.
40. The present value ratio of a proposed investment will be:
A. less than 1.0 if the net present value is positive.
B. negative if the proposed investment meets the cost of capital target.
C. less than 1.0 if the net present value is negative.
D. greater than 1.0 if the cost of capital exceeds the internal rate of return.
41. The principal weakness of the payback method for evaluating proposed investments is that it does not:
A. provide a way of ranking projects in order of desirability.
B. consider cash flows that continue after the investment has been recovered.
C. result in an easily understood “answer”.
D. recognize the time value of money.
42. The accounting rate of return method for evaluating proposed investments:
A. is based on cash receipts and disbursements related to the investment.
B. uses accounting net income from the operating budget.
C. does not recognize the time value of money.
D. is easier to use than the net present value method.
43. The capital budgeting analytical technique that calculates the rate of return on the investment based on the impact of the investment on the financial statements is known as the:
A. internal rate of return.
B. accounting rate of return.
C. payback period.
D. net present value.
44. An advantage of the net present value method for evaluating investment proposals over the internal rate of return method is that:
A. only one set of present value calculations using a required discount rate is made.
B. the actual rate of return on the project is calculated.
C. projects can be ranked in order of profitability using the net present value amount.
D. estimates of future cash flows do not have to be made.
45. If an asset costs $16,000, has an expected useful life of 8 years, is expected to have a $2,000 salvage value and generates net annual cash inflows of $2,000 a year, the cash payback period is
A. 8 years.
B. 7 years.
C. 6 years.
D. 5 years.
Welcome to one of the most trusted essay writing services with track record among students. We specialize in connecting students in need of high-quality essay writing help with skilled writers who can deliver just that. Explore the ratings of our essay writers and choose the one that best aligns with your requirements. When you rely on our online essay writing service, rest assured that you will receive a top-notch, plagiarism-free A-level paper. Our experienced professionals write each paper from scratch, carefully following your instructions. Request a paper from us and experience 100% originality.
From stress to success – hire a pro essay writer!
