Test Bank For
Financial & Managerial Accounting
for Decision Makers 5th Edition By
Hanlon, Magee, Pfeiffer, Kulp,
Dragoo
(All Chapters 1-24, 100% Original
Verified, A+ Grade)
All Chapters Arranged Reverse:
24-1
This is The Original Test Bank For
5th Edition, All other Files in The
Market are Fake/Old/Wrong
Edition.
,Chapter 24
Question 1 Marked out of 10.00
Custer Company is evaluating a capital expenditure proposal with the following predicted cash flows:
Initial investment: $54,000
Operations:
Year 1 Net cash flow $20,000
Year 2 Net cash flow 14,000
Year 3 Net cash flow 25,000
Salvage value: 0
Discount rate 12%
Determine the payback period:
2.8 years
Question 2 Marked out of 10.00
Custer Company is evaluating a capital expenditure proposal with the following predicted cash flows:
Initial investment: $54,000
Operations:
Year 1 Net cash flow $21,000
Year 2 Net cash flow 14,000
Year 3 Net cash flow 25,000
Salvage value: 0
Discount rate 12%
Determine the accounting rate of return using average investment:
Note: Round answer to two percentage points. Enter 10.444% as 10.44%; Enter 10.445% as 10.45%.
7.41 %
Question 3 Marked out of 10.00
Custer Company is evaluating a capital expenditure proposal with the following predicted cash flows:
Initial investment: $54,000
Operations:
Year 1 $20,000
Year 2 14,000
Year 3 25,000
Salvage value: 0
Additional information for interest rate of 12 percent:
Present value of $1 - Year 1 0.89286
Present value of $1 - Year 2 0.79719
Present value of $1 - Year 3 0.71178
Present value of an annuity of $1, (3 periods) 2.4018
Determine the net present value of the investment at a discount rate of 12 percent. Round to the nearest cent.
$ (7,187.64)
.
,Question 4 Marked out of 10.00
Zenni Inc. is considering the following three capital proposals:
Proposal A Proposal B Proposal C
Initial investment $250,000 $200,000 $100,000
Annual net cash flows $66,500 $47,000 $40,000
Life (years) 5.0 6.0 3.0
Payback (years) 3.8 4.3 2.5
NPV (10% discount rate) $2,087 $4,697 $(526)
IRR 10.3% 10.8% 9.7%
The company initially screens projects considering a maximum payback period of 3 years and a positive net present value using a discount
rate of 10%.
Provide a recommendation on whether to invest in proposal A, B, or C based only on the company's screening considerations.
Proposal A Proposal B Proposal C
Reject Reject Reject
If liquidity concerns were in the forefront and only one proposal must be recommended, which proposal should be recommended?
Proposal C
Question 5 Marked out of 10.00
Custer Company is evaluating a capital expenditure proposal with the following predicted cash flows:
Initial investment: $54,000
Operations:
Year 1 $20,000
Year 2 14,000
Year 3 25,000
Salvage value: 0
Determine the internal rate of return of the investment.
Note: Round answer to two percentage points. Enter 10.444% as 10.44%; Enter 10.445% as 10.45%.
4.37 %
Question 6 Marked out of 10.00
Determine which are true or false of the payback period capital budget model.
False Does consider all cash flows from project
True Does not consider time value of money
True Does not measure project profitability
True Focuses on liquidity concerns
True Quick and easy screening tool
.
, Question 7 Marked out of 10.00
Laser Company has to purchase some new equipment. Two manufacturers have provided the following information:
Equipment A Equipment B
Initial costs $67,500 $90,000
Estimated life 5 years 5 years
Annual savings $22,500 $24,000
Discount rate 10% 10%
Determine the present value of annual savings for each piece of equipment, using Excel. Round to the nearest cent.
Equipment A: $ 85,292.7
Equipment B: $ 90,978.88
Question 8 Marked out of 10.00
Assume a company is considering upgrade to its manufacturing facilities with an initial cost of $2,240,000. The upgrade is predicted to result in
net cash inflows over a ten-year period of $400,000 annually. The company's discount rate is 11%.
Would the following scenarios increase or decrease the NPV. Each scenario is an independent situation.
Decrease The cash flows were adjusted down by 15%.
Increase The discount rate was adjusted down to 8%.
Increase The number of years of cash flows is adjusted up to 11 years.
Question 9 Marked out of 10.00
What is the future value in 3 years of $10,000 invested today in a certificate of deposit with interest compounded annually at 5%? Round to the
nearest cent.
$ 11,576.25
Question 10 Marked out of 10.00
What is the present value of $29,282 to be received in four years, discounted at 10%.
$ 20,000
Question 11 Marked out of 10.00
Assume Disney is evaluating a capital expenditure proposal that requires an initial investment of $353,760, has cash inflows of $90,960 per
year for the six years, and has no salvage value.
Determine the proposal's internal rate of return using Excel.
Note: Round answer to two percentage points. Enter 10.444% as 10.44%; Enter 10.445% as 10.45%.
14 %
.
Financial & Managerial Accounting
for Decision Makers 5th Edition By
Hanlon, Magee, Pfeiffer, Kulp,
Dragoo
(All Chapters 1-24, 100% Original
Verified, A+ Grade)
All Chapters Arranged Reverse:
24-1
This is The Original Test Bank For
5th Edition, All other Files in The
Market are Fake/Old/Wrong
Edition.
,Chapter 24
Question 1 Marked out of 10.00
Custer Company is evaluating a capital expenditure proposal with the following predicted cash flows:
Initial investment: $54,000
Operations:
Year 1 Net cash flow $20,000
Year 2 Net cash flow 14,000
Year 3 Net cash flow 25,000
Salvage value: 0
Discount rate 12%
Determine the payback period:
2.8 years
Question 2 Marked out of 10.00
Custer Company is evaluating a capital expenditure proposal with the following predicted cash flows:
Initial investment: $54,000
Operations:
Year 1 Net cash flow $21,000
Year 2 Net cash flow 14,000
Year 3 Net cash flow 25,000
Salvage value: 0
Discount rate 12%
Determine the accounting rate of return using average investment:
Note: Round answer to two percentage points. Enter 10.444% as 10.44%; Enter 10.445% as 10.45%.
7.41 %
Question 3 Marked out of 10.00
Custer Company is evaluating a capital expenditure proposal with the following predicted cash flows:
Initial investment: $54,000
Operations:
Year 1 $20,000
Year 2 14,000
Year 3 25,000
Salvage value: 0
Additional information for interest rate of 12 percent:
Present value of $1 - Year 1 0.89286
Present value of $1 - Year 2 0.79719
Present value of $1 - Year 3 0.71178
Present value of an annuity of $1, (3 periods) 2.4018
Determine the net present value of the investment at a discount rate of 12 percent. Round to the nearest cent.
$ (7,187.64)
.
,Question 4 Marked out of 10.00
Zenni Inc. is considering the following three capital proposals:
Proposal A Proposal B Proposal C
Initial investment $250,000 $200,000 $100,000
Annual net cash flows $66,500 $47,000 $40,000
Life (years) 5.0 6.0 3.0
Payback (years) 3.8 4.3 2.5
NPV (10% discount rate) $2,087 $4,697 $(526)
IRR 10.3% 10.8% 9.7%
The company initially screens projects considering a maximum payback period of 3 years and a positive net present value using a discount
rate of 10%.
Provide a recommendation on whether to invest in proposal A, B, or C based only on the company's screening considerations.
Proposal A Proposal B Proposal C
Reject Reject Reject
If liquidity concerns were in the forefront and only one proposal must be recommended, which proposal should be recommended?
Proposal C
Question 5 Marked out of 10.00
Custer Company is evaluating a capital expenditure proposal with the following predicted cash flows:
Initial investment: $54,000
Operations:
Year 1 $20,000
Year 2 14,000
Year 3 25,000
Salvage value: 0
Determine the internal rate of return of the investment.
Note: Round answer to two percentage points. Enter 10.444% as 10.44%; Enter 10.445% as 10.45%.
4.37 %
Question 6 Marked out of 10.00
Determine which are true or false of the payback period capital budget model.
False Does consider all cash flows from project
True Does not consider time value of money
True Does not measure project profitability
True Focuses on liquidity concerns
True Quick and easy screening tool
.
, Question 7 Marked out of 10.00
Laser Company has to purchase some new equipment. Two manufacturers have provided the following information:
Equipment A Equipment B
Initial costs $67,500 $90,000
Estimated life 5 years 5 years
Annual savings $22,500 $24,000
Discount rate 10% 10%
Determine the present value of annual savings for each piece of equipment, using Excel. Round to the nearest cent.
Equipment A: $ 85,292.7
Equipment B: $ 90,978.88
Question 8 Marked out of 10.00
Assume a company is considering upgrade to its manufacturing facilities with an initial cost of $2,240,000. The upgrade is predicted to result in
net cash inflows over a ten-year period of $400,000 annually. The company's discount rate is 11%.
Would the following scenarios increase or decrease the NPV. Each scenario is an independent situation.
Decrease The cash flows were adjusted down by 15%.
Increase The discount rate was adjusted down to 8%.
Increase The number of years of cash flows is adjusted up to 11 years.
Question 9 Marked out of 10.00
What is the future value in 3 years of $10,000 invested today in a certificate of deposit with interest compounded annually at 5%? Round to the
nearest cent.
$ 11,576.25
Question 10 Marked out of 10.00
What is the present value of $29,282 to be received in four years, discounted at 10%.
$ 20,000
Question 11 Marked out of 10.00
Assume Disney is evaluating a capital expenditure proposal that requires an initial investment of $353,760, has cash inflows of $90,960 per
year for the six years, and has no salvage value.
Determine the proposal's internal rate of return using Excel.
Note: Round answer to two percentage points. Enter 10.444% as 10.44%; Enter 10.445% as 10.45%.
14 %
.
