Questions from Managerial Accounting

Q: Explain why NPV is generally preferred over IRR when choosing among competing

Explain why NPV is generally preferred over IRR when choosing among competing or mutually exclusive projects. Why would managers continue to use IRR to choose among mutually exclusive projects?

Q: Suppose that a firm must choose between two mutually exclusive projects,

Suppose that a firm must choose between two mutually exclusive projects, both of which have negative NPVs. Explain how a firm can legitimately choose between two such projects.

Q: Capital investments should a. always produce an increase in

Capital investments should a. always produce an increase in market share. b. only be analyzed using the ARR. c. earn back their original capital outlay plus a reasonable return. d. always be done usi...

Q: To make a capital investment decision, a manager must

To make a capital investment decision, a manager must a. estimate the quantity and timing of cash flows. b. assess the risk of the investment. c. consider the impact of the investment on the firm’s p...

Q: Mutually exclusive capital budgeting projects are those that a.

Mutually exclusive capital budgeting projects are those that a. if accepted or rejected do not affect the cash flows of other projects. b. if accepted will produce a negative NPV. c. if rejected prec...

Q: An investment of $6,000 produces a net annual cash

An investment of $6,000 produces a net annual cash inflow of $2,000 for each of 5 years. What is the payback period? a. 2 years b. 1.5 year c. Unacceptable d. 3 years e. Cannot be determined.

Q: Fresh Foods, a large restaurant chain, needed to determine if

Fresh Foods, a large restaurant chain, needed to determine if it would be cheaper to produce 5,000 units of its main food ingredient for use in its restaurants or to purchase them from an outside supp...

Q: An investment of $1,000 produces a net cash inflow

An investment of $1,000 produces a net cash inflow of $500 in the first year and $750 in the second year. What is the payback period? a. 1.67 years b. 0.50 year c. 2.00 years d. 1.20 years e. Cannot...

Q: The payback period suffers from which of the following deficiencies?

The payback period suffers from which of the following deficiencies? a. It is a rough measure of the uncertainty of future cash flows. b. It helps control the risk of obsolescence. c. It ignores the...

Q: The ARR has one specific advantage not possessed by the payback period

The ARR has one specific advantage not possessed by the payback period in that it a. considers the time value of money. b. measures the value added by a project. c. is always an accurate measure of p...