A306 Healy|90 Exam 2 Revision
Questions
The potential benefit given up when selecting one alternative over
another is a(n) ______ cost. - ✔ ✔ opportunity
When computing the simple rate of return, the annual incremental net
operating income in the numerator should ______ the investment's
depreciation charges. - ✔ ✔ be reduced by
The length of time that it takes for a project to recover its initial cost
from the net cash inflows that it generates is the - ✔ ✔ payback
period
The term capital budgeting is used to describe how managers plan
significant investments in projects that have ______ implications. - ✔
✔ long-term
Another term for the minimum required rate of return is the cost of -
✔ ✔ capital
The internal rate of return - ✔ ✔ is the discount rate that makes
NPV equal to zero for a project
Suppose a project with a negative net present value would provide
intangible benefits. To estimate the annual value of intangible benefits
needed to accept the project, ______ the negative net present value
excluding intangible benefits by the ______. - ✔ ✔ divide, present
value factor for an annuity
, The net present value of a project is ______. - ✔ ✔ used when
determining whether or not a project is an acceptable capital
investment and the difference between the present value of cash
inflows and present value of cash outflows for a project
Investment required ÷ Annual net cash inflow is the formula to find the
factor that needed to calculate the ______. - ✔ ✔ internal rate of
return
A business segment should only be dropped if a company can avoid
more in fixed costs than it gives up in ______. - ✔ ✔ contribution
margin
Stephens, Inc. is considering dropping a product line. During the prior
year, the line had sales of $170,000, variable costs of $86,000 and total
fixed expenses of $110,000. Of the fixed expenses, $95,000 are
avoidable. If Stephens drops the product line, net operating income will
______. - ✔ ✔ increase by 11,000
- relevant costs : VC and avoidable FC
170,000-86,000 = contribution margin of $84,000
$95,000-$84,000= $11,000
A set of activities ranging from development to production to after-
sales service is called ______. - ✔ ✔ the value chain
Questions
The potential benefit given up when selecting one alternative over
another is a(n) ______ cost. - ✔ ✔ opportunity
When computing the simple rate of return, the annual incremental net
operating income in the numerator should ______ the investment's
depreciation charges. - ✔ ✔ be reduced by
The length of time that it takes for a project to recover its initial cost
from the net cash inflows that it generates is the - ✔ ✔ payback
period
The term capital budgeting is used to describe how managers plan
significant investments in projects that have ______ implications. - ✔
✔ long-term
Another term for the minimum required rate of return is the cost of -
✔ ✔ capital
The internal rate of return - ✔ ✔ is the discount rate that makes
NPV equal to zero for a project
Suppose a project with a negative net present value would provide
intangible benefits. To estimate the annual value of intangible benefits
needed to accept the project, ______ the negative net present value
excluding intangible benefits by the ______. - ✔ ✔ divide, present
value factor for an annuity
, The net present value of a project is ______. - ✔ ✔ used when
determining whether or not a project is an acceptable capital
investment and the difference between the present value of cash
inflows and present value of cash outflows for a project
Investment required ÷ Annual net cash inflow is the formula to find the
factor that needed to calculate the ______. - ✔ ✔ internal rate of
return
A business segment should only be dropped if a company can avoid
more in fixed costs than it gives up in ______. - ✔ ✔ contribution
margin
Stephens, Inc. is considering dropping a product line. During the prior
year, the line had sales of $170,000, variable costs of $86,000 and total
fixed expenses of $110,000. Of the fixed expenses, $95,000 are
avoidable. If Stephens drops the product line, net operating income will
______. - ✔ ✔ increase by 11,000
- relevant costs : VC and avoidable FC
170,000-86,000 = contribution margin of $84,000
$95,000-$84,000= $11,000
A set of activities ranging from development to production to after-
sales service is called ______. - ✔ ✔ the value chain
