Objective type questions on capital budgeting

Assignment Help Finance Basics
Reference no: EM1314243

Objective type questions on capital budgeting

1. Chee Company has gathered the following data on a proposed investment project: The payback period for the investment is closest to:

a. 0.2 years

b. 2.5 years

c. 4.8 years

d. 5.0 years

2. The management of Leitheiser Corporation is considering a project that would require an initial investment of $51,000. No other cash outflows would be required. The present value of the cash inflows would be $57,630.
The profitability index of the project is closest to:

A. 1.13

B. b 0.87

C. 0.13

D. 0.12

3. Gibboney Inc. has provided the following data to be used in evaluating a proposed investment project:
For tax purposes, the entire initial investment without any reduction for salvage value will be depreciated over 7 years. The company uses a discount rate of 12%. When computing the net present value of the project, what is the annual amount of the depreciation tax shield? In other words, by how much does the depreciation deduction reduce taxes each year in which the depreciation deduction is taken?

a. $37,714

b. $88,000

c. $77,000

d. $33,000

4. Allo Foundation, a tax-exempt organization, invested $200,000 in cost saving equipment. The equipment has a five-year useful life with no salvage value. Allo estimates that the annual cash savings from this project will amount to $65,000. On investments of this type, Allo's required rate of return is 12%.
Allo's internal rate of return on this project is closest to:

a. 13%

b. 15%

c. 17%

d. 19%

5. Shufflebarger Inc. has provided the following data to be used in evaluating a proposed investment project:
The company's tax rate is 30%. For tax purposes, the entire initial investment will be depreciated over 5 years without any reduction for salvage value. The company uses a discount rate of 16%. When computing the net present value of the project, what are the annual after-tax cash receipts?

a. $112,000

b. $137,200

c. $29,400

d. $58,800

6. Chee Company has gathered the following data on a proposed investment project: The internal rate of return on the investment is closest to:

a. 11%

b. 13%

c. 15%

d. 17%

7. Gibboney Inc. has provided the following data to be used in evaluating a proposed investment project: For tax purposes, the entire initial investment without any reduction for salvage value will be depreciated over 7 years. The company uses a discount rate of 12%. The net present value of the project is closest to:

a. $464,622

b. $439,736

c. 292,494

d. $267,608

8. Dumora Corporation is considering an investment project that will require an initial investment of $9,400 and will generate the following net cash inflows in each of the five years of its useful life: Dumora's payback period for this investment project is closest to:

a. 1.91 years

b. 2.61 years

c. 2.89 years

d. 3.40 years

9. Virginia Company invested in a four-year project. Virginia's discount rate is 10%. The cash inflows from this project are: Assuming a positive net present value of $1,000, the amount of the original investment was closest to:

a. $2,552

b. $4,552

c. $13,427

d. $17,400

10. The Malaise Prevention Agency is a non-profit organization that does all of its own informational printing. The printing press that Malaise currently is using needs a $20,000 overhaul. This will extend the useful life of the press by 8 years. As an alternative, Malaise could buy a brand new modern press for $45,000. The new press would also last 8 years. The annual operating expenses of the old press are $12,000. The annual operating expenses of the new press will only be $7,000. The old press is not expected to have a salvage value in 8 years. The new press is expected to have a $6,000 salvage value in 8 years. Malaise\'s discount rate is 14%. The net present value of the decision to buy the new press instead of overhauling the old press is closest to:

a. $301

b. $(301)

c. $4,195

d. $(46,089)

Reference no: EM1314243

Questions Cloud

Computation of the weighted average cost of capital : Computation of the weighted average cost of capital and Jake's Sound Systems has 210,000 shares of common stock outstanding at a market price of $36 a share
Hypothesis test for analysis of variance : The critical F value with 6 numerator and 60 denominator degrees of freedom at α = .05 is:
Preparation of bad debt account : Preparation of Bad debt Account and their Adjustment - What's the total f account in bad debts expense and What's the amount of the adjuster
Calculating the compound interest formula : Calculating the compound interest formula.
Objective type questions on capital budgeting : Objective type questions on capital budgeting and describe Chee Company has gathered the following data on a proposed investment project
Adjustment in general account balances : Adjustment in general account balances - Olsen Company has two office employees who earn $80 and $100 per day, respectively. They are paid each Friday for a five-day work week that begins each Monday. June 30 is a Tuesday in 2009.
Non parametric test-kruskal wallis test with box plots : Conduct post hoc comparisons with the LSD method. Which groups differ significantly at α = 0.05?
Determine cash payments for wages during the year : BLP Corporation reported wages expense of $224,000, wages payable of $89,400 at the beginning of the year and wages payable of $71,300 at the end of the year. Determine Cash payments for wages during the year
Describe questions on capital budgeting decisions : Describe questions on capital budgeting decisions and explain If salvage value is ignored in depreciating an asset for tax purposes, any sales proceeds received at the end of the life of the asset are fully taxable as income.

Reviews

Write a Review

 

Finance Basics Questions & Answers

  What is key aspects in decision making

What is key aspects in Decision making and When making decision about the business that management should be asking

  What is capital budgeting

What is Capital budgeting and assess the conclusions we might make about the wisdom of undertaking this project

  Compounded semi-annually for first four years

invested for total 6 years at 6% compounded semi-annually for first four years followed by 12%compounded quarterly for final 2 years.

  Objective type questions on preferred stock

Objective type questions on preferred stock and If markets are in equilibrium then what will occur

  Objective type questions on leverages

Objective type questions on leverages and The major short coming of the EBIT-EPS approach to capital structure is that

  Computation the payback period for a project

Computation the payback period for a project has the following costs and benefits

  Computation of the internal rate of return of capital

Computation of the Internal rate of Return of capital project and What is the IRR for the following project if its initial cost

  Objective type questions on capital budgeting and stocks

Objective type questions on Capital Budgeting and stocks and explain Cause surpluses and shortages in markets respectively

  Explain capital budgeting involves calculation

Explain Capital budgeting involves calculation of net present value and What is this project's internal rate of return

  Objective type questions on payback period npv irr and mirr

Objective type questions on payback period, NPV, IRR and MIRR and What is the internal rate of return that Jamaica can earn on this project

  Discuss on anon don or continue of the project using npv

Discuss on anon don or continue of the project using NPV analysis and What is the NPV of the option to continue

  Computation of payback period

Computation of payback period and he company expects, as a result, cash flows of $979,225, $1,158,886

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd