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Multiple Choice Quiz
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1
Which of the following might be a nonfinancial factor in a capital investment decision?
A)Corporate image
B)Better working conditions
C)Employee morale
D)All of the above
2
Consider the following:

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What is the amount of annual net cash flows from this investment?
A)$16,800
B)$20,000
C)$13,600
D)$ 9,600
3
Consider the following:

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The investment cost $58,800. Calculate the payback period.
A)12.25 years
B)7.35 years
C)3.5 years
D)6.125 years
4
If the payback period is 5.65 years and the estimated annual net cash flow from the investment is $25,000, what was the amount invested?
A)$141,250
B)$442,448
C)$116,250
D)$125,000
5
Consider the following:

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What is the return on average investment (ROI)?
A)5.4%
B)6.0%
C)9.8%
D)36.0%
6
Present Values of $1 Due in n Periods

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Cash flows at the end of each of the next four years will be $10,000, $12,000, $8,000, and $14,000 respectively. What is the total discounted value of the cash flows if the discount rate is a constant 8% per year?
A)$44,000
B)$32,340
C)$34,936
D)$36,186
7
Present Values of $1 to Be Received Periodically for n Periods

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A relative has left you an inheritance that you can elect to receive through the selection of one of several options. For the next 4 time periods, your required rate of return (discount rate) will be 10%. Which option would you chose?
A)Receive $40,000 at the end of Period 3
B)Receive $38,000 at the end of Period 2
C)Receive $12,000 at the end of each of the next 4 periods
D)Receive $43,000 at the end of Period 4
8
The decision-making techniques used in a decision to replace existing equipment should include identifying which of the following?
A)Relevant information.
B)Incremental analysis.
C)Discounting future cash flows.
D)All of the above.
9
Consider the following:

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To simplify the problem, assume that both forklifts have a remaining useful life of 5 years, with no salvage value. The discount rate for $1 due in 1 year at 10% is .909. The discount rate for $1 to be received periodically for 5 years at 10% is 3.791. What is net present value of the investment?
A)$8,048 negative
B)$9,140 negative
C)$7,775 negative
D)$502 negative
10
Which of the following is one of the internal controls established by companies for the capital budgeting process to help guard against overly optimistic or pessimistic estimates and aggregation errors?
A)Balanced scorecard
B)Capital budget audit
C)Prioritizing nonfinancial considerations
D)None of the above





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