Solved by verified expert :46. Which of the following statements is

true regarding the payback period?

A. The time value of money is considered

when calculating the payback.

B. The payback analysis is more accurate

than the net present value analysis.

C. The payback period is less accurate than

the accounting rate of return.

D. The time value of money is not

considered when calculating the payback.

Boccardi Inc., has invested in new pasta

manufacturing equipment at a cost of $48,000. The equipment has an estimated

useful life of eight years. Estimated annual sales and operating expenses

related to the pasta equipment follow:

47. The estimated payback of the investment

in the pasta equipment is:

A. 3.0 years.

B. 4.0 years.

C. 6.0 years.

D. 8.0 years.

48. The estimated accounting rate of return

is:

A. 12.5%.

B. 18.0%.

C. 25.0%.

D. 33.3%.

49. In a capital budgeting decision, if a

firm uses the net present value method and a 12% discount rate, what does a

negative net present value indicate?

A. The proposal’s rate of return exceeds

12%.

B. The proposal’s rate of return is less

than the minimum rate required.

C. The proposal earns a rate of return

between 10% and 12%.

D. None of the above.

50. A capital budgeting decision method

that considers the time value of money is the

A. accounting rate of return method.

B. return on stockholders’ equity method.

C. cash payback method.

D. internal rate of return method.

51. Which of the following is a true

statement regarding the internal rate of return in capital budgeting?

A. It provides the same basic information

as the net present value method.

B. It calculates the net present value of

future cash flows.

C. It calculates the proposal’s rate of

return.

D. It doesn’t consider the time value of

money.

52. Which of the following is a true

statement regarding the net present value method in capital budgeting?

A. It provides the same basic information

as the accounting rate of return.

B. It calculates the present value of

future cash flows.

C. It calculates the proposal’s rate of

return.

D. It doesn’t consider the time value of

money.

53. Sometimes when management decisions are

reached the investment project with the highest NPV or IRR is not selected.

This occurs because:

A. a lower IRR is a less risky investment.

B. the highest NPV is not necessarily the

highest IRR.

C. qualitative factors override

quantitative analysis techniques.

D. sometimes management makes the wrong

decision.