Ch 25 Acc
investments must earn a reasonable rate of return, employees are able to determine and propose capital equipment for their divisions or departments, proposals should match long term goals (all of the above)
which of the following is important when evaluating long-term investments
it takes into consideration the time value of money
which of the following is not an advantage of the average rate of return method?
equal proposal lives
which of the following is not considered as a complicating factor in capital investment decisions?
depreciation deduction
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?
using only quantitative measures to purchase an asset
which of the following would not be considered a good managerial tool in making a decision for determining a capital investment?
determines whether the project should be funded by using operating cash or the issuance of bonds
capital rationing uses the following measures to determine the funding of projects except:
variable cost analysis
decisions to install new equipment, replace old equipment, and purchase or construct a new building are examples of
non financial factors
in capital rationing, alternative proposals that survive initial and secondary screening are normally evaluated in terms of:
cash payback method and average rate of return method
in capital rationing, an initial screening of alternative proposals is usually performed by establishing minimum standards. which of the following evaluation methods are often used?
inflation
periods in time that experience increasing price levels are known as periods of:
capital rationing
process by which management allocates available investment funds among competing investment proposals is called:
annuity
series of equal cash flows at fixed intervals is termed a(n):
the longer the payback, the longer the estimated life of the asset
the cash payback method is widely used in evaluating investments. the following are reasons why this method is used except:
average rate of return method
the method of analyzing capital investment proposals that divides the estimated average annual income by the average investment is:
methods that ignore present value
the methods of evaluating capital investment proposals can be separated into two general groups— present value methods and:
amount to be invested/annual net cash flow
the present value for an annuity of $1 is determined using which of the following formulas?
total present value of net cash flow/ amount to be invested
the present value index is computed using which of the following formulas?
it emphasizes the amount of income earned over the life of the proposal
the primary advantages of the average rate of return method are its ease of computation and the fact that:
capital investment analysis
the process by which management plans, evaluates, and controls long-term investment decisions involving fixed assets is called:
sunk cost
all of the following are factors that may complicate capital investment analysis except:
time value of money
all of the following are qualitative considerations may impact upon capital investments analysis except:
manufacturing sunk cost
all of the following are qualitative considerations may impact upon investments analysis except:
the proposal is desirable and the rate of return expected from the proposal exceeds the minimum rate used for analysis
an analysis of a proposal by the net present value method indicated that the present value of future cash inflows exceeded the amount to be invested. which of the following statements best describes the results of this analysis?
has a time value
by converting dollars to be received in the future into current dollars, the present value methods take into consideration that money:
present value index
when several alternative investment proposals of the same amount are being considered, the one with the largest net present value is the most desirable. if the alternative proposals involve different approaches of investment, it is useful to prepare a relative ranking of the proposals by using a(n):
net present value
which method for evaluating capital investment proposals reduces the expected future net cash flows originating from the proposals to their present values and computes a net present value?
internal rate of return
which method of evaluating capital investment proposals uses present value concepts to compute the rate of return from the net cash flows expected from capital investment proposals?
internal rate of return
which methods of evaluating capital investment proposals uses the concept of present value to compute a rate of return
average rate of return and cash payback method
which of the following are two methods of analyzing capital investment proposals that both ignore present value?
present value index
which of the following can be used to place capital investment proposals involving different amounts of investment on a comparable basis for purposes of net present value analysis?
average rate of return
which of the following is a method of analyzing capital investment proposals that ignores present value?
net present value
which of the following is a present value method of analyzing capital investment proposals?
net present value and internal rate of return
which of the following is a present value methods of analyzing capital investment proposals?
it is easy to use
which of the following is an advantage of the cash payback method?