Question;Kaplan GB519 Unit 4 quizKaplan GB519 Unit 4 quiz;1. When;deciding whether to discontinue a segment of a business, managers should focus;on: (Points: 2);The;amount of operating income per unit produced by the segment.;The;amount of contribution margin per direct labor hour in the segment.;How corporate-level administrative costs;would be redistributed if the segment were eliminated.;Equipment from the segment that could go idle if the segment were;discontinued.;The total contribution margin;generated by the segment relative to any traceable (avoidable) fixed costs;associated with the segment.;Question 2. 2.;Costs relevant to a make-versus-buy decision include variable;manufacturing costs as well as: (Points: 2);Avoidable fixed costs.;Factory;depreciation.;Unavoidable costs.;Property taxes on the manufacturing facility.;Factory administrative costs.;Question 3. 3.;In situations when management must decide on accepting or rejecting;one-time-only special orders, where there is sufficient idle capacity, which;one of the following is not relevant to the decision? (Points: 2);Absorption costs.;Differential costs.;Direct costs.;Variable costs.;Incremental costs.;Question 4. 4.;The major problem with relevant cost determination is that it fails to;recognize the: (Points: 2);Impact;of variable costs in the long run.;Long-term nature of most;product-related decisions.;Sunk" nature of most fixed product costs.;Short-term nature of most product-related decisions.;Question 5. 5.;Sensitivity analysis in linear programming is used to: (Points: 2);Determine the degree that the constraints vary.;Test;the accuracy of the parameters.;Develop the technical matrix.;Determine how the optimal;decision would react to changes in parameters.;Develop objective function coefficients.;6. All the following are characteristic of relevant costs except: (Points: 2) They are generally variable. They are not committed. They are different in amount for different options. They are costs that will be incurred in the future. They are inventory-related costs. Question 7. 7. The net present value (NPV) method and the internal rate of return (IRR) method are used to analyze proposed capital expenditures. The IRR method, as contrasted with the NPV method: (Points: 2) Is considered inferior because it fails to calculate compounded rates of return. Incorporates the time value of money, while the NPV method does not. Almost always gives a different decision that the NPV method as to the acceptability ("go" versus "no go") of a given proposed investment. Assumes that the rate of return on the reinvestment of the cash proceeds is at the indicated rate of return of the project analyzed rather than at the discount rate used. Is preferred in practice because it is able to handle multiple desired rates of return, which is impossible to do with the NPV method. Question 8. 8. Flex Corporation is studying a capital investment proposal in which newly acquired assets will be depreciated using the straight-line (SL) method. Which one of the following statements about the proposal would be incorrect if, instead of SL, the Modified Accelerated Cost Recovery System (MACRS) is used for determining depreciation for income tax purposes? (Points: 2) The estimated net present value (NPV) of the project would increase. The internal rate of return (IRR) of the project would likely increase. The payback period for the investment would be shortened. The total after-tax income from this project, over its life, would normally increase. Total tax payments over the life of the project would be unaffected. Question 9. 9. If an existing asset is sold at a gain, and the gain is taxable, then the after-tax proceeds from this transaction would be equal to: (Points: 2) Net proceeds from the sale plus the after-tax gain on the sale. Net proceeds from the sale less the after-tax gain on the sale. Net proceeds from the sale plus the taxes paid on the gain. Net proceeds from the sale less the taxes paid on the gain. Question 10. 10. Which of the following would not be considered a benefit of conducting post-implementation audits of capital investment projects? (Points: 2) Such audits ensure the realization of future after-tax cash flows. Such audits facilitate learning from estimation errors. Knowledge that investments are subject to post-implementation audit can counter tendencies to inflate estimates of net cash benefits associated with proposed investment projects. The use of such audits allows top management to identify and reward good project planners.;11. Which of the following is not one of the four general classes of real options? (Points: 2) Expansion option. Exercise option. Abandonment option. Investment-timing option (e.g., delay) Question 12. 12. Which one of the following is an advantage of the book (accounting) rate of return method for analyzing capital investment proposals? (Points: 2) It is not affected by different accounting methods. It is precise and objective. Data for calculating the return are typically readily available. The method explicitly adjusts for the time value of money. The accounting rate of return is generally approximately equal to a project's internal rate of return (IRR). Question 13. 13. Carmino Company is considering an investment in equipment that will generate an after-tax income of $6,000 for each year of its four-year life. The asset has no salvage value. The firm is in the 40% tax bracket. The net book value (NBV) of the investment at the beginning of each year will be as follows: Year 1 = $30,000Year 2 = 15,000Year 3 = 7,500Year 4 = 3,750 The amount of after-tax cash inflow from the asset in Year 3 is: (Points: 2) $6,600. $7,500. $8,100. $9,000. $9,750. Question 14. 14. Carmino Company is considering an investment in equipment that will generate an after-tax income of $6,000 for each year of its four-year life. The asset has no salvage value. The firm is in the 40% tax bracket. The net book value (NBV) of the investment at the beginning of each year will be as follows: Year 1 = $30,000Year 2 = 15,000Year 3 = 7,500Year 4 = 3,750 Calculate this asset's book (accounting) rate of return on average investment, which is defined as a simple average of the average book value for each of the four years. Round the final answer to the nearest whole %. (Points: 2) 15%. 27%. 36%. 43%. 58%. Question 15. 15. Pique Corporation wants to purchase a new machine for $300,000. Management predicts that the machine can produce sales of $200,000 each year for the next 5 years. Expenses are expected to include direct materials, direct labor, and factory overhead (excluding depreciation) totaling $80,000 per year. The firm uses straight-line depreciation with no residual value for all depreciable assets. Pique's combined income tax rate is 40%. Management requires a minimum after-tax rate of return of 10% on all investments. What is the payback period for the new machine (rounded to nearest one-tenth of a year)? (Assume that the cash inflows occur evenly throughout the year). (Points: 2) 2.5 years. 2.7 years. 3.1 years. 3.6 years.
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