2102 Final
Payback period =
Amount invested /Expected annual net cash flow
Describe at least four advantages of budgeting.
Gives you control over your money Helps you organize your spending and savings Enables you to save for expected and unexpected costs Keeps you focused on your money goals
Describe qualitative factors to consider at the outsourcing decision.
Relative net advantage given uncertainty of estimates (costs, risks, etc.) Reliability and number of sources of supply Ability to assure quality Future bargaining position with suppliers Perceptions regarding possible future price changes
Which of the following is a major consideration when analyzing a special pricing decision?
The sales price must be high enough to cover any differential costs to fill the order.
payback
a capital budgeting method that ignores the time value of money
Which of the following best describes the term capital rationing?
a process of ranking and choosing among alternative capital investments based on the availability of funds
If an investment's internal rate of return is higher than the required rate of return, the company should
accept
At the internal rate of return, the present value of net cash inflows will equal the
initial cost of the investment
Which of the following best describes the internal rate of return?
interest rate that makes the net present value of the investment equal to zero
Capital budgeting
involves deciding among various long-term investments
Which of the following is a capital budgeting method?
net present value
Net present value represents the difference between the
present value of the investment's net cash inflows and the investment's initial cost
Net present value
represents the difference between the present value of the investment's net cash inflows and the investment's initial cost
An investment should be accepted if
the net present value is positive