11 the accounting rate of return method focuses on net operating income instead of n 4306352

11 the accounting rate of return method focuses on net operating income instead of n 4306352

11) The accounting rate of return method focuses on net operating income instead of net cash inflow generated by an asset.

12) The accounting rate of return is also known as average rate of return or annual rate of return.

13) The accounting rate of return method evaluates the lifetime return of an asset, whereas return on investment evaluates an annual return.

14) The accounting rate of return is calculated by dividing the average annual operating income by the average amount invested.

15) Which of the following is a capital budgeting method that ignores the time value of money?

A) payback

B) internal rate of return

C) return on assets

D) net present value

16) Which capital budgeting method uses accrual accounting, rather than net cash flows, as a basis for calculations?

A) payback

B) accounting rate of return

C) net present value

D) internal rate of return

17) Flint Systems is considering investing in production-management software that costs $600,000, has $60,000 residual value, and leads to cost savings of $150,000 per year over its five-year life. Calculate the average amount invested in the asset that should be used for calculating the accounting rate of return?

A) $660,000

B) $600,000

C) $330,000

D) $60,000

18) Cortes Cargo Inc. is considering three investment opportunities with the following payback periods:

Project X

Project Y

Project Z

Payback period

3 years

2.5 years

2.8 years

Use the decision rule for payback to rank the projects from most desirable to least desirable, all else being equal.

A) Y, Z, X

B) X, Y, Z

C) Z, Y, X

D) Y, X, Z

19) Newman Automobiles Manufacturing is considering two alternative investment proposals with the following data:

Proposal X

Proposal Y

Investment

$10,000,000

$500,000

Useful life

5 years

5 years

Estimated annual net cash inflows for 5 years

$2,000,000

$95,000

Residual value

$50,000

$20,000

Depreciation method

Straight-line

Straight-line

Required rate of return

12%

10%

Calculate the payback period for Proposal X.

A) 5 years

B) 4 years

C) 8 years

D) 10 years

20) Newman Automobiles Manufacturing is considering two alternative investment proposals with the

following data:

Proposal X

Proposal Y

Investment

$10,000,000

$500,000

Useful life

5 years

5 years

Estimated annual net cash inflows for 5 years

$2,000,000

$95,000

Residual value

$50,000

$20,000

Depreciation method

Straight-line

Straight-line

Required rate of return

12%

10%

Calculate accounting rate of return for Proposal Y.

A) 8.95%

B) 10.21%

C) 7.50%

D) 6.57%

"Get 15% discount on your first 3 orders with us"
Use the following coupon
"FIRST15"

Order Now

Related Posts