Questions from Managerial Accounting

Q: An investment of $2,000 provides an average net income

An investment of $2,000 provides an average net income of $400. Depreciation is $40 per year with zero salvage value. The ARR using the original investment is a. 44%. b. 22%. c. 20%. d. 40%. e. none...

Q: If the NPV is positive, it signals a.

If the NPV is positive, it signals a. that the initial investment has been recovered. b. that the required rate of return has been earned. c. that the value of the firm has increased. d. all of these...

Q: NPV measures a. the profitability of an investment.

NPV measures a. the profitability of an investment. b. the change in wealth. c. the change in firm value. d. the difference in present value of cash inflows and outflows. e. all of these.

Q: NPV is calculated by using a. the required rate

NPV is calculated by using a. the required rate of return. b. accounting income. c. the IRR. d. the future value of cash flows. e. none of these.

Q: Using NPV, a project is rejected if it is

Using NPV, a project is rejected if it is a. equal to zero. b. negative. c. positive. d. equal to the required rate of return. e. greater than the cost of capital.

Q: If the present value of future cash flows is $4,

If the present value of future cash flows is $4,200 for an investment that requires an outlay of $3,000, the NPV a. is $200. b. is $1,000. c. is $1,200. d. is $2,200. e. cannot be determined.

Q: Assume that an investment of $1,000 produces a future

Assume that an investment of $1,000 produces a future cash flow of $1,000. The discount factor for this future cash flow is 0.80. The NPV is a. $0. b. $110. c. ($200). d. $911. e. none of these.

Q: Explain how creditors, investors, and managers can use common-

Explain how creditors, investors, and managers can use common-size analysis as an aid in decision making.

Q: Elway Company provided the following income statement for the last year:

Elway Company provided the following income statement for the last year: Sales …………………………………………….. $1,040,000,000 Less: Variable expenses ……………………... 700,250,000 Contribution margin ………………………… $ 339,...

Q: Which of the following is not true regarding the IRR?

Which of the following is not true regarding the IRR? a. The IRR is the interest rate that sets the present value of a project’s cash inflows equal to the present value of the project’s cost. b. The...