FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 15: Capital Investment Analysis

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 31

Multiple Choice

Review LaterAdd Note

Review Later

The amount of the average investment for a proposed investment of $70,000 in a fixed asset,with a useful life of four years,recognition is given to the effect of straight-line depreciation on the investment,no residual value,and an expected total net income of $21,600 for the 4 years,is:

A) $10,800.
B) $21,600.
C) $35,000.
D) $30,000.

E) A) and B)
F) B) and C)

Correct Answer

verified

Show Answer

Question 32

Multiple Choice

Review LaterAdd Note

Review Later

The average rate of return for this investment is:

A) 5%.
B) 10%.
C) 25%.
D) 15%.

E) B) and C)
F) C) and D)

Correct Answer

verified

Show Answer

Question 33

Essay

Review LaterAdd Note

Heedy Inc.is considering a capital investment proposal that costs $460,000 and has an estimated life of four years,and no residual value.The estimated net cash flows are as follows:

When evaluating a proposal by use of the net present value method,if the present value is less than the amount to be invested,the rate of return on the proposal is more than the rate used in the analysis.

The payback period is determined using which of the following formulas?

Harris Co.is considering a 12-year project that is estimated to cost $900,000 and has no residual value.Harris seeks to earn an average rate of return of 15% on all capital projects.Determine the necessary average annual income (using straight-line depreciation)that must be achieved on this project for it to be acceptable to Harris Co.

A company should purchase an asset when the minimum rate of return exceeds its average rate of return.

Qualitative considerations are best evaluated using present value methods such as internal rate of return.

Methods that ignore present value in capital investment analysis include the cash payback method.

The expected average rate of return for a proposed investment of $3,000,000 in a fixed asset giving effect to depreciation (straight-line method) with a useful life of 20 years,no residual value,and an expected total income of $6,000,000 is:

The anticipated purchase of a fixed asset for $400,000,with a useful life of 5 years and no residual value,is expected to yield total net income of $200,000 for 5 years.The expected average rate of return on investment computed is 20%.

The net present value for this investment is:

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?

The average rate of return method of capital investment analysis gives consideration to the present value of future cash flows.

Using the following partial table of present value of $1 at compound interest,determine the present value of $20,000 to be received three years hence,with earnings at the rate of 10% a year.

The process by which management allocates available investment funds among competing capital investment proposals is termed capital rationing.

Average rate of return equals average investment divided by estimated average annual income.

In net present value analysis for a proposed capital investment,the expected future net cash flows are reduced to their present values.

The process by which management allocates available investment funds among competing capital investment proposals is termed present value analysis.

One of the qualitative characteristics that influence capital investment analysis is product quality.