College Acct 2- Chapter 12

Front

Which method assumes that the cash flows from an investment project are reinvested at the internal rate of return?

Back

only the internal rate of return method.

Front

The Zingstad Corporation is considering an investment with the following data (Ignore income taxes). Cash inflows occur evenly throughout the year. The payback period for this investment is:

Back

3.5 years

Front

Which rate does the internal rate of return method assume for reinvestment of a project's cash flows?

Back

internal rate of return.

Front

What is the simple rate of return on an investment in new machinery for Slomkowski Corporation that boosts annual sales revenues by $350,000, increases annual cash operating expenses by $160,000, costs $800,000, has a 10-year life with no salvage value, and an annual depreciation of $80,000?

Back

13.75%

Front

If the net present value of a project is zero based on a discount rate of 12%, then the internal rate of return is:

Back

equal to 12%.

Front

When a company has unlimited funds to invest at its discount rate, it should prioritize projects that: exhibit a net present value greater than zero.

Back

exhibit a net present value greater than zero.

Front

What is the payback period for a project requiring a $750,000 investment with a ten-year life and an 8% required rate of return?

Back

5 years

Front

Which of the following best describes a preference decision in capital budgeting? Options: It is the initial step in the capital budgeting process., It involves selecting the best option among various acceptable projects., It focuses on determining if a project meets the minimum required rate of return., It uses customer feedback to prioritize projects.

Back

It involves selecting the best option among various acceptable projects.

Front

A company is evaluating a project with an internal rate of return that matches the company's discount rate. What is the net present value (NPV) of this project?

Back

Zero

Front

What is the simple rate of return on an investment in equipment that increases sales revenues by $300,000 per year and cash operating expenses by $180,000 per year, costing $320,000 with a 5 year life and no salvage value?

Back

17.5%