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9.

QUESTION 8

1. Which of the following uses the time value of money in the calculations?

   		Payback method
   		Accounting Rate of Return
   		Internal Rate of Return
   		None of the above use the time value of money in the calculations.

10.

1. =Which of the following should be addressed in a special pricing decision?

   		A. Does the company have excess capacity to fill the order?
   		B. Will the lower sales price cover the incremental costs?
   		C. Will accepting the special pricing order affect regular sales in the long run?
   		D. All of the above are correct.

11.

1. Decide if each is an annuity or not an annuity.

   a. $1000 cash received per year for 10 years

   b. $200 paid in month 1, $150 paid in month 2 and $400 paid in month 3

   		a) annuity b) not an annuity
   		a) annuity b) annuity
   		a) not an annuity b) not an annuity
   		a) not an annuity b) annuity

12.

1. /Augustus Company is considering investing in new equipment. Based on the following, what is the Accounting Rate of Return?

   Estimated Cost of New Equipment					$600,000
   Useful life in years					5
   Estimated Residual Value					$50,000
   Expected Net Cash Inflows over life of asset					$850,000

   		15.38%
   		18.46%
   		83.33%
   		38.24%

13.

1. Zane plans to visit Los Angeles for a week. His share of the hotel room with friends is about $250 (about the same he pays for a week of rent at home), $220 for food and drink (about the same as he pays for a week when home). He is a part time employee with no vacation benefits so will not get his usual $500 weekly wage. Based on this information, what is Craig's total opportunity cost if he goes on vacation?

   		$600
   		$500
   		$470
   		$750

14.

1. -Do the methods below use Cash Flows or Operating Income

   Method			Cash Flows or Operating Income
   Net Present Value			1
   Accounting Rate of Return			2
   Payback Period			3

   		1 Cash Flows 2 Cash Flows 3 Cash Flows
   		1 Operating Income 2 Cash Flows 3 Cash Flows
   		1 Operating Income 2 Cash Flows 3 Operating Income
   		1 Cash Flows 2 Operating Income 3 Cash Flows

15.

QUESTION 15

1. Which of the following is correct related to capital budgeting?

   		Capital budgeting is an exact science.
   		It is a plan to invest in capital assets in a way that returns the most profit to a company.
   		The first step in the capital budgeting process is usually to perform post-audits.
   		Estimated amounts are not usually used in the capital budgeting process.

16.

1. In a decision to either sell as is or process a product further, __________costs are considered irrelevant and _____________costs are considered relevant.

   		joint, process further
   		process further, joint
   		variable costs, joint
   		process further, variable

17.

1. Which of the following would typically mean a project would be accepted?

   		The IRR is higher than the hurdle rate.
   		The present value of the net cash inflows is less than the initial investment.
   		The payback period takes longer than the useful life.
   		The investment will have a residual value.

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