1.
Capital investment analysis is
A. 
The process of analyzing the sales mix
B. 
The process by which management plans, evaluates and controls investments in fixed assets
C. 
The process by which management plans, evaluates and controls investments in other company's stock.
D. 
The process of analyzing financing options.
2.
Which of the following is not true of capital investments?
A. 
They involve investments of an immaterial amount.
B. 
They involve investments that earn a reasonable rate of return
C. 
They affect operations for many years.
D. 
They involve the long-term commitment of funds.
3.
Which of the following is a method of analyzing capital investment proposals that ignores present value?
A. 
B. 
C. 
D. 
4.
Decisions to install new equipment, purchase other businesses, and purchase a new building are examples of
A. 
B. 
Capital investment analysis.
C. 
D. 
Absorption cost analysis.
5.
A. 
B. 
C. 
D. 
6.
An anticipated purchase of equipment for $400,000, with a useful life of 8 years and no residual value, is expected to yield the following annual net incomes and net cash flows:What is the cash payback period?
A. 
B. 
C. 
D. 
7.
Which of the following is a present value method of analyzing capital investment proposals?
A. 
B. 
C. 
Accounting rate of return
D. 
Internal rate of return method
8.
Using the following partial table of present value of $1 at compound interest, determine the present value of $25,000 to be received four years hence, with earnings at the rate of 10% a year:
A. 
B. 
C. 
D. 
9.
The management of Arnold Corporation is considering the purchase of a new machine costing $430,000. The company's desired rate of return is 10%. The present value factors for $1 at compound interest of 10% for 1 through 5 years are 0.909, 0.826, 0.751, 0.683, 0.621, respectively. In addition to the foregoing information, use the following data in determining the acceptability in this situation:The net present value for this investment is:
A. 
B. 
C. 
D. 
10.
All of the following qualitative considerations may impact upon capital investments analysis except:
A. 
Manufacturing productivity.
B. 
Manufacturing fixed assets
C. 
Manufacturing flexibility
D. 
11.
Which of the following provisions of the Internal Revenue Code can be used to reduce the amount of the income tax expense arising from capital investment projects?
A. 
B. 
Alternative minimum tax provision
C. 
D. 
12.
Assume in analyzing alternative proposals that Proposal A has a useful life of five years and Proposal B has a useful life of eight years. What is one widely used method that makes the proposals comparable?
A. 
Ignore the fact that Proposal A has a useful life of five years and treat it as if it has a useful life of eight years
B. 
Adjust the life of Proposal A to a time period that is equal to that of Proposal B by estimating a residual value at the end of year five
C. 
Ignore the useful lives of five and eight years and find an average (6 1/2 years).
D. 
Ignore the useful lives of five and eight years and compute the average rate of return
13.
All of the following are factors that may complicate capital investment analysis except:
A. 
B. 
Current fixed asset levels
C. 
D. 
14.
Capital rationing involves all of the following except:
A. 
Ranking of the proposals.
B. 
Determination of whether the project should be funded by using operating cash or the issuance of bonds
C. 
Establishing of minimum standards by applying the cash payback and the average rate of return.
D. 
Evaluation of qualitative factors
15.
Which of the following factors does not have an impact on the outcome of a capital investment decision?
A. 
Income tax considerations
B. 
C. 
D. 
Lease versus capital investment
16.
Which of the following is not true of capital investments?
A. 
They involve the long-term commitment of funds.
B. 
They affect operations for many years.
C. 
They involve some of the most important business decisions that management makes
D. 
They involve investments of an immaterial amount
17.
The process by which management plans, evaluates, and controls long-term investment decisions involving fixed assets is called:
A. 
B. 
C. 
Capital investment analysis
D. 
Cost-volume-profit analysis.
18.
Decisions to install new equipment, replace old equipment, and purchase a new building are examples of
A. 
B. 
Capital investment analysis
C. 
D. 
19.
Which of the following are two methods of analyzing capital investment proposals that both ignore present value?
A. 
Internal rate of return and average rate of return
B. 
Net present value and average rate of return
C. 
Internal rate of return and net present value
D. 
Average rate of return and cash payback method
20.
The expected average rate of return for a proposed investment of $44,000 in a fixed asset, using straight line Depreciation, with a useful life of 4 years, no residual value, and an expected total net income of $12,320 is:
A. 
B. 
C. 
D. 
21.
An anticipated purchase of equipment for $500,000, with a useful life of 8 years and no residual value, is expected to yield the following annual net incomes and net cash flows:What is the cash payback period?
A. 
B. 
C. 
D. 
22.
Below is a table for the present value of $1 at Compound interest.Below is a table for the present value of an annuity of $1 at compound interest.Using the tables above, what would be the present value of $15,000 (rounded to the nearest dollar) to be received three years from today, assuming an earnings rate of 6%?
A. 
B. 
C. 
D. 
23.
Below is a table for the present value of $1 at Compound interest.Below is a table for the present value of an annuity of $1 at compound interest.Using the tables above, if an investment is made now for $20,000 that will generate a cash inflow of $8,000 a year for the next 4 years, what would be the net present value (rounded to the nearest dollar) of the investment, (assuming an earnings rate of 10%)?
A. 
B. 
C. 
D. 
24.
The management of Arnold Corporation is considering the purchase of a new machine costing $420,000. The company's desired rate of return is 10%. The present value factors for $1 at compound interest of 10% for 1 through 5 years are 0.909, 0.826, 0.751, 0.683, 0.621, respectively. In addition to the foregoing information, use the following data in determining the acceptability in this situation:The present value index for this investment is:
A. 
B. 
C. 
D. 
25.
All of the following qualitative considerations may impact upon capital investments analysis except:
A. 
Net present value of the investment
B. 
C. 
The impact on product quality.
D. 
Manufacturing flexibility.