ACCT 349 WEEK 6 QUIZ LATEST
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ACCT 349 Week 6 Quiz Latest
ACCT349
ACCT 349 Week 6 Quiz Latest
Question 1. (TCO 7)
The payback capital budgeting technique considers the following.
Time Value of Money Income Over Entire Life of Project
Yes Yes
Yes No
No Yes
No No
Question 2. (TCO 7)
The Valley Corporation is considering (as of 1/1/08) the
replacement of an old machine that is currently being used. The old machine is
fully depreciated but can be used by the corporation through 2011. If Valley
decides to replace the old machine, Baker Company has offered to purchase it
for $50,000 on the replacement date. The disposal value of the old machine
would be zero at the end of 2011. Valley uses the straight-line method of
depreciation for all classes of machinery.
If the replacement occurs, a new machine would be acquired from
Busby Industries on January 2, 2008. The purchase price of $500,000 for the new
machine would be paid in cash at the time of replacement. Due to increased
efficiency of the new machine, estimated annual cash savings of $150,000 would
be generated through 2011, the end of its expected useful life. The new machine
is expected to have a zero disposal price at the end of 2011.
All operating cash receipts, operating cash expenditures, and
applicable tax payments and credits are assumed to occur at the end of the
year. Valley uses the calendar year for reporting purposes.
Discount tables for several different interest (discount) rates
that are to be used in any discounting calculations are given below. Unless
told otherwise, assume that Valley is not subject to income taxes.
Period 6% 8% 10% 12% 14%
1 .94 .93 .91 .89 .88
2 .89 .86 .83 .80 .77
3 .84 .79 .75 .71 .68
4 .79 .74 .68 .64 .59
5 .75 .68 .62 .57 .52
Present Value of an Annuity of $1.00 Received at the End of Each
Period
Period 6% 8% 10% 12% 14%
1 0.94 0.93 0.91 0.89 0.88
2 1.83 1.78 1.73 1.69 1.65
3 2.67 2.58 2.49 2.40 2.32
4 3.47 .3.31 3.17 3.04 2.91
5 4.21 3.99 3.79 3.61 3.43
3.3 years.
3.0 years.
4.0 years.
2.5 years.
Question 3. (TCO 7)
The Valley Corporation is considering (as of 1/1/08) the
replacement of an old machine that is currently being used. The old machine is
fully depreciated but can be used by the corporation through 2011. If Valley
decides to replace the old machine, Baker Company has offered to purchase it
for $50,000 on the replacement date. The disposal value of the old machine
would be zero at the end of 2011. Valley uses the straight-line method of
depreciation for all classes of machinery.
If the replacement occurs, a new machine would be acquired from
Busby Industries on January 2, 2008. The purchase price of $500,000 for the new
machine would be paid in cash at the time of replacement. Due to increased
efficiency of the new machine, estimated annual cash savings of $150,000 would
be generated through 2011, the end of its expected useful life. The new machine
is expected to have a zero disposal price at the end of 2011.
All operating cash receipts, operating cash expenditures, and
applicable tax payments and credits are assumed to occur at the end of the
year. Valley uses the calendar year for reporting purposes.
Discount tables for several different interest (discount) rates
that are to be used in any discounting calculations are given below. Unless
told otherwise, assume that Valley is not subject to income taxes.
Present Value of $1.00 Received at the End of the Period
Period 6% 8% 10% 12% 14%
1 .94 .93 .91 .89 .88
2 .89 .86 .83 .80 .77
3 .84 .79 .75 .71 .68
4 .79 .74 .68 .64 .59
5 .75 .68 .62 .57 .52
Present Value of an Annuity of $1.00 Received at the End of Each
Period
Period 6% 8% 10% 12% 14%
1 0.94 0.93 0.91 0.89 0.88
2 1.83 1.78 1.73 1.69 1.65
3 2.67 2.58 2.49 2.40 2.32
4 3.47 .3.31 3.17 3.04 2.91
5 4.21 3.99 3.79 3.61 3.43
The accrual accounting rate of return on initial investment to
the nearest percent is
0%.
11.0%.
5.6%.
30%.
Question 4. (TCO 7)
Assume that a required rate of return of 12% is used to compute
the NPV of a project. If NPV is positive, IRR is greater than 12%.
True
False
Question 5. (TCO 7)
If the income tax rate for a profitable company is 30%, a
depreciation deduction of $10,000 results in a tax savings of $7,000 (before
considering the time value of money).
True
False
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