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finance data bank

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Question;171. Computer Disk Duplicators, Inc. has been;considering several capital investment proposals for the year beginning in;2004. For each investment proposal, the relevant cash flows and other relevant;financial data are summarized in the table below. In the case of a replacement;decision, the total installed cost of the equipment will be partially offset by;the sale of existing equipment. The firm is subject to a 40 percent tax rate on;ordinary income and on long-term capital gains. The firm's cost of capital is;15 percent.;172. For Proposal 1, the cash flow pattern for the;expansion project is ________. (See Table 8.4.);A) a mixed stream and conventional.;B) a mixed stream and non-conventional.;C) an annuity and conventional.;D) an annuity and non-conventional.;173. For;Proposal 1, the initial outlay equals ________. (See Table 8.4.);A) $1,380,000;B) $1,440,000;C) $1,500,000;D) $1,620,000;174. For;Proposal 1, the depreciation expense for year 1 is ________. (See Table 8.4.);A) $110,400;B) $115,200;C) $150,000;D) $300,000;175. For Proposal 1, the annual incremental after-tax;cash flow from operations for year 1;178. For Proposal 2, the tax effect on the sale of the;existing asset results in ________. (See Table 8.4.);A) $12,000 tax liability.;B) $14,560 tax liability.;C) $25,280 tax liability.;D) $16,600 tax liability.;179. For;Proposal 2, the initial outlay equals ________. (See Table 8.4.);A) $120,720 cash outflow.;B) $164,560 cash outflow.;C) $150,000 cash outflow.;D) $167,520 cash outflow.;180. For;Proposal 2, the incremental depreciation expense for year 2 is ________. (See;Table 8.4.);A) $16,800;B) $26,400;C) $38,400;D) $60,000;181. For;Proposal 2, the annual incremental after-tax cash flow from operations for year;2 is ________. (See Table 8.4.);A) $18,000;B) $24,000;C) $66,000;D) $84,000;182. For Proposal 3, the cash flow pattern for the;replacement project is ________. (See Table 8.4.);A) a mixed stream and conventional.;B) a mixed stream and non-conventional.;C) an annuity and conventional.;D) an annuity and non-conventional.;183. For;Proposal 3, the book value of the existing asset is ________. (See Table 8.4.);A) $21,000;B) $43,000;C) $52,000;D) $80,000;184. For Proposal 3, the tax effect on the sale of the;existing asset results in ________. (See Table 8.4.);A) $8,000 tax liability.;B) $16,000 tax liability.;C) $20,000 tax liability.;D) $23,200 tax liability.;185. Which;of the following capital budgeting techniques ignores the time value of money?;A) simulations.;B) sensitivity analysis.;C) decision trees.;D) multiple regression;analysis.;187. ________ measure(s) the risk of a capital budgeting;project by estimating the NPVs associated with the optimistic A) Payback.;B) Net present value.;C) Internal rate of return.;D) Two of the above;186. Diagrams;that permit the mapping of the various investment decision alternatives and;payoffs as well as their;probabilities of occurrence are;called, most likely, and pessimistic cash flow estimates.;A) Simulations;B) Risk-adjusted discount rates;C) Sensitivity analysis;D) Multiple regression analysis;188. The advantage of using simulation in the capital;budgeting process is;A) ease of calculation.;B) the availability of a continuum of;risk-return trade-offs which may be used as the basis for decision-making.;C) dependability of predetermined;probability distributions.;D) that it generates a continuum of risk-return;trade-offs rather than a single-point estimate.;189. Many;firms use the payback method as a guideline in capital investment;decisions. Reasons they do so include all of the following EXCEPT;A) it gives an implicit consideration to;the timing of cash flows.;B) it recognizes cash flows which occur;after the payback period.;C) it is a measure of risk exposure.;D) it is easy to calculate.;190. Payback;is considered an unsophisticated capital budgeting because it;A) gives explicit consideration to the;timing of cash flows and therefore the time value of money.;B) gives explicit consideration to risk;exposure due to the use of the cost of capital as a discount rate.;C) gives explicit consideration to the;timing of cash flows and therefore the time value of money.;D) none of the above.

 

Paper#50975 | Written in 18-Jul-2015

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