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Test Bank For Financial & Managerial Accounting for Decision Makers 5 th 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 5 th Edition, All other Files in The Market are Fake/Old/Wrong Edition. 1 / 4
Question 1Marked out of 10.00 Question 2Marked out of 10.00 Question 3Marked 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 flow14,000 Year 3 Net cash flow25,000
Salvage value: 0
Discount rate 12%
Determine the payback period:
2.8 years 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 flow14,000 Year 3 Net cash flow25,000
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 %
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 10.89286 Present value of $1 - Year 20.79719 Present value of $1 - Year 30.71178 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)
Chapter 24
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Question 4Marked out of 10.00 Question 5Marked out of 10.00 Question 6Marked out of 10.00
Zenni Inc. is considering the following three capital proposals:
Proposal AProposal BProposal 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)
IRR10.3% 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 AProposal BProposal C RejectRejectReject If liquidity concerns were in the forefront and only one proposal must be recommended, which proposal should be recommended?Proposal C 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 %
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
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Question 7Marked out of 10.00 Question 8Marked out of 10.00 Question 9Marked out of 10.00 Question 10Marked out of 10.00 Question 11Marked out of 10.00
Laser Company has to purchase some new equipment. Two manufacturers have provided the following information: Equipment AEquipment 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
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.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
What is the present value of $29,282 to be received in four years, discounted at 10%.
$20,000
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 % .
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