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income taxes, of $3,000 in each of the 10 years.; The accounting (book
value) rate of return is expected to be 10% on the initial increase in
required investment. The cost of the new machine will be
• Question 10 Net present value as used in investment decision-making
is stated in terms of which of the following options?
• Question 11 On January 1, 2012, Colt Company issued 10-year bonds
with a face amount of $1,000,000 and a stated interest rate of 8%
payable annually on January 1. The bonds were priced to yield 10%.
Present value factors are as follows:
• Question 12 Assume that manage ment of Trayco has generated the
following data about an investment project that has a five-year life:
• Question 13 Assume that management of Trayco has generated the
following data about an investment project that has a five-year life:
• Question 14 Which of the following statements is correct regarding
payback method as a capital budgeting technique?
• Question 15 A client wants to know how many years it will take
before the accumulated cash flows from an investment exceed the initial
investment, without taking the time value of money into account. Which
of the following financial models should be used?
• Question 16 Which of the following limitations is common to the
calculations of payback period, discounted cash flow, internal rate of
return, and net present value?
• Question 17 A project has an initial outlay of $1,000. The projected
cash inflows are
• Question 18 Harvey Co. is evaluating a capital investment proposal
for a new machine. The investment proposal shows the following
information:
• Question 19 How are the following used in the calculation of the net
present value of a proposed project? Ignore income tax considerations.
• Question 20 In considering the payback period for three projects, Fly
Corp. gathered the following data about cash flows:
• Question 21 The discount rate (hurdle rate of return) must be
determined in advance for the
• Question 22 Which of the following statements is correct regarding
financial decision making?