Post University Net Present Value Managerial Accounting Questions

Business Finance

The management of Penfold Corporation is considering the purchase of a machine that would cost $320,000, would last for 5 years, and would have no salvage value. The machine would reduce labor and other costs by $75,000 per year. The company requires a minimum pretax return of 12% on all investment projects.

Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using the tables provided.

The net present value of the proposed project is closest to (Ignore income taxes.):

Multiple Choice

Top of Form

$(49,625)

$(9,625)

$(124,625)

$(319,997)

Bottom of Form

Crowl Corporation is investigating automating a process by purchasing a machine for $807,300 that would have a 9 year useful life and no salvage value. By automating the process, the company would save $140,500 per year in cash operating costs. The new machine would replace some old equipment that would be sold for scrap now, yielding $22,700. The annual depreciation on the new machine would be $89,700. The simple rate of return on the investment is closest to (Ignore income taxes.):

Multiple Choice

11.27%

16.87%

6.47%

5.27%

In a statement of cash flows, the sale of a long-term investment would ordinarily be classified as:

Multiple Choice

Top of Form

an operating activity.

a financing activity.

an investing activity.

a lending activity.

Bottom of Form

The company’s net income for the year was $52 and it did not sell or retire any property, plant, and equipment during the year. Cash dividends were $9. The net cash provided by (used in) investing activities for the year was:

Multiple Choice

Top of Form

$17

$67

($17)

($67)

Bottom of Form

Net income for the year was $60. Cash dividends were $12. The company did not dispose of any property, plant, and equipment. It did not issue any bonds payable or repurchase any of its own common stock. The following questions pertain to the company’s statement of cash flows.

The net cash provided by (used in) financing activities for the year was:

Multiple Choice

$10

$5

$(12)

$17

Which of the following is correct regarding the operating activities section of the statement of cash flows?

Multiple Choice

The change in Accounts Payable will be added to net income; The change in Accrued Liabilities will be subtracted from net income

The change in Accounts Payable will be subtracted from net income; The change in Accrued Liabilities will be added to net income

The change in Accounts Payable will be subtracted from net income; The change in Accrued Liabilities will be subtracted from net income

The change in Accounts Payable will be added to net income; The change in Accrued Liabilities will be added to net income

The net cash provided by (used in) investing activities for the year was:

Multiple Choice

$(113)

$113

$(24)

$24

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