GB519: Measurement and Decision Making unit 4 quiz
1.To make a special order decision, managers need critical information about all the following except: (Points : 2)
Relevant costs.
Prior period operating costs.
Any opportunity costs.
The strategic, competitive environment of the firm.
2.The opportunity cost of making a component part in a factory with excess capacity for which there is no alternative use is: (Points : 2)
The variable manufacturing cost of the component.
The total manufacturing cost of the component.
The total variable cost of the component.
The fixed manufacturing cost of the component.
Zero.
3.A truck, costing $25,000 and uninsured, was wrecked the very first day it was used. It can either be disposed of for $5,000 cash and be replaced with a similar truck costing $27,000, or rebuilt for $20,000 and be brand new as far as operating characteristics and looks are concerned. The best choice provides a net savings of: (Points : 2)
$2,000.
$5,000.
$7,000.
$12,000.
4.When the internal rate of return (IRR) method and the net present value (NPV) method do not yield the same recommendation for the same investment project, the technique normally selected is: (Points : 2)
IRR, because all reinvestment of funds occurs at the rate of the cost of capital and because it takes into consideration the relative size of the initial investment.
NPV, because it takes into consideration the relative size of the initial investment.
IRR, because all reinvestment of funds occurs at the discount rate that will make the NPV of the project equal to zero.
NPV, because all reinvestment of funds occurs at the discount rate that will make the NPV of the project equal to zero.
5.Which one of the following statements concerning capital budgeting is not true? (Points : 2)
A basic objective underlying capital budgeting is to select assets that will earn a satisfactory return.
Capital budgeting is the process of planning asset investments.
Capital budgeting is based on precise estimates of future events.
Capital budgeting involves estimating the revenues and costs of each proposed project, evaluating their merits, and choosing those worthy of investment.
Capital budgeting uses after-tax cash flows in the analysis of proposed investments.
6.Which one of the following methods assumes that all interim cash inflows generated by an investment earn a return equal to the internal rate of return (IRR) of the investment? (Points : 2)
Modified internal rate of return (MIRR).
Payback.
Net present value (NPV).
Present value index (PI).
Internal rate of return method (IRR).
7.Generally speaking, when ranking two mutually exclusive investments with different initial amounts, management should give first priority to the project: (Points : 2)
That generates cash flows for the longer period of time.
Whose net after-tax cash flows equal the initial investment outlay.
That has the greater accounting rate of return (ARR).
Whose cash flows vary the least.
That has the greater profitability index (PI).
8.The decision technique that measures the estimated performance of a capital investment by dividing the project’s annual after-tax income by the average investment cost is called the: (Points : 2)
Break-even point for the project.
Internal rate of return on the proposed investment.
Accounting (book) rate of return on the investment.
Capital asset pricing model.
Profitability index (PI) for the investment.
9.Which of the following is not a characteristic of the payback method for making capital budgeting decisions? (Points : 2)
It is easy to calculate and comprehend.
It focuses primarily on liquidity, rather than profitability of an investment project.
It can be considered a rough measure of risk.
It considers returns over the entire life of the project.
It requires estimates of after-tax cash inflows and after-tax cash outflows.
10.A profitable company pays $100,000 wages and has depreciation expense of $100,000. The company’s income tax rate is 40%. The after-tax effects on cash flow are a net cash outflow of: (Points : 2)
$40,000 for wages and a net cash inflow of $60,000 for depreciation expenses.
$40,000 for wages and a net cash inflow of $40,000 for depreciation expenses.
$60,000 for wages and a net cash inflow of $60,000 for depreciation expenses.
$60,000 for wages and a net cash inflow of $40,000 for depreciation expenses.
$40,000 for wages and a net cash inflow of $100,000 for depreciation expenses.
11.A decision bias is an inherent tendency of most decision makers that leads to incorrect decisions. An example of decision bias is: (Points : 2)
Failure to consider all relevant costs.
Failure to properly identify sunk costs as irrelevant.
Failure to consider opportunity cost.
Failure to adjust for the time value of money.
Our website has a team of professional writers who can help you write any of your homework. They will write your papers from scratch. We also have a team of editors just to make sure all papers are of HIGH QUALITY & PLAGIARISM FREE. To make an Order you only need to click Ask A Question and we will direct you to our Order Page at WriteDemy. Then fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Fill in all the assignment paper details that are required in the order form with the standard information being the page count, deadline, academic level and type of paper. It is advisable to have this information at hand so that you can quickly fill in the necessary information needed in the form for the essay writer to be immediately assigned to your writing project. Make payment for the custom essay order to enable us to assign a suitable writer to your order. Payments are made through Paypal on a secured billing page. Finally, sit back and relax.
Do you need an answer to this or any other questions?
About Writedemy
We are a professional paper writing website. If you have searched a question and bumped into our website just know you are in the right place to get help in your coursework. We offer HIGH QUALITY & PLAGIARISM FREE Papers.
How It Works
To make an Order you only need to click on “Order Now” and we will
direct you to our Order Page. Fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Are there Discounts?
All new clients are eligible for 20% off in their first Order. Our payment method is safe and secure.
