80.2K

Verified Solution

Link Copied!

1. A firm is considering a project requiring an investment of $30,000. The project would generate an annual cash flow of $7,251 for the next six years. The company uses the straight-line method of depreciation with no mid-year convention. Ignore income taxes. The approximate internal rate of return for the project is:

a.11%.

b.10%.

c.12%.

d.9%.

2. The budgeted contribution margin of two products is $1,000 the actual contribution margin is $500 and the total variable expenses are $750. The contribution margin variance is:

a.$750(U)

b.$500(F)

c.$750(F)

d.$500(U)

3. Buying multiperiod activity capacity is often done by paying cash up front and is always:

a.irrelevant because it is a sunk cost.

b.relevant because it generates future revenues or benefits.

c.relevant because it could reduce future costs.

d.relevant because it is a variable cost.

4. In activity-based costing (ABC), unit-level costs are highest in the:

a.introduction phase of a product's life cycle.

b.growth phase of a product's life cycle.

c.maturity phase of a product's life cycle.

d.decline phase of a product's life cycle.

5. Melancholy Company is considering the purchase of production equipment that costs $800,000. The equipment is expected to generate an annual cash flow of $250,000 and have a useful life of five years with no salvage value. The firm's cost of capital is 12 percent. The company uses the straight-line method of depreciation with no mid-year convention. There are no income taxes. The payback period in years for the project is

a.3.20 years.

b.4.20 years.

c.3.25 years.

d.2.90 years.

Answer & Explanation Solved by verified expert

See Answer