ACCT 201B EXAM 3 Questions with
Solved Solutions 2026-2027 Update.
Simple Rate of Return Formula - Answer Annual incremental net operating income/ initial
investment
Simple Rate of Return - Answer -focuses on accounting net operating income: if new
equipment is replacing old then the initial investment is the cost of the new equipment - any
salvage value from the old.
-DOESNT consider the time value of money: will not be an accurate guide to the probability of
an investment project
Relevant cost - Answer a cost that differs between alternatives: avoidable cost. differential
cost, and incremental cost
irrelevant cost - Answer a cost that does not differ between alternatives and should be ignored
;sunk cost
Make or buy decision - Answer a decision concerning whether an item should be produced
internally or purchased from an outside supplier
Turn over formula - Answer sales/ average operating assets
Net Present Value - Answer <cash outflow> + cashinflow ;
Npv > 0 accepted
Npv=0 accepted
npv<0 declined
discounted rate in present value - Answer the companys required rate of return, which is often
the companys cost of capital.
cost of capital - Answer the average rate of return the company must pay its long term
creditors and shareholders fro the use of their funds
discounted cash flow analysis - Answer outflows: include initial investment, installation costs,
increased working capital needs, repairs and maintenance and incremental operating costs
Inflows: incremental revenues reduction in costs, salvage value and release of working capital at
the end of the period
Solved Solutions 2026-2027 Update.
Simple Rate of Return Formula - Answer Annual incremental net operating income/ initial
investment
Simple Rate of Return - Answer -focuses on accounting net operating income: if new
equipment is replacing old then the initial investment is the cost of the new equipment - any
salvage value from the old.
-DOESNT consider the time value of money: will not be an accurate guide to the probability of
an investment project
Relevant cost - Answer a cost that differs between alternatives: avoidable cost. differential
cost, and incremental cost
irrelevant cost - Answer a cost that does not differ between alternatives and should be ignored
;sunk cost
Make or buy decision - Answer a decision concerning whether an item should be produced
internally or purchased from an outside supplier
Turn over formula - Answer sales/ average operating assets
Net Present Value - Answer <cash outflow> + cashinflow ;
Npv > 0 accepted
Npv=0 accepted
npv<0 declined
discounted rate in present value - Answer the companys required rate of return, which is often
the companys cost of capital.
cost of capital - Answer the average rate of return the company must pay its long term
creditors and shareholders fro the use of their funds
discounted cash flow analysis - Answer outflows: include initial investment, installation costs,
increased working capital needs, repairs and maintenance and incremental operating costs
Inflows: incremental revenues reduction in costs, salvage value and release of working capital at
the end of the period
