(Solution) If A Company Invests In A Project With An Internal Rate Of Return Higher Than The Company's Cost Of Capital, The Project Should: A) Decrease The... | Snapessays.com


(Solution) If a company invests in a project with an internal rate of return higher than the company's cost of capital, the project should: A) Decrease the...


Please see the attached document for the multiple choice questions.1.

 

If a company invests in a project with an internal rate of return higher than the company’s cost of

 

capital, the project should:

 

A)

 

Decrease the market value of the company’s stock

 

B)

 

Have little or no effect on the market value of the company’s stock

 

C)

 

Increase the market value of the company’s stock.

 

D)

 

Reduce the weighted average cost of capital

 

2.

 

The following is a disadvantage of the payback period method:

 

A)

 

It is more complicated to calculate with unequal annual cash flows

 

B)

 

There is no consideration of cash flows after the payback period

 

C)

 

There is no consideration of the timing of cash flows

 

D)

 

Both A and B are disadvantages of this method.

 

3.

 

The payback period method of evaluating investment projects is

 

most

 

appropriate:

 

A)

 

When a project is expected to lose money

 

B)

 

When it is used as the sole investment criterion

 

C)

 

When no information is available concerning the timing of cash inflows

 

D)

 

When rapid recovery of initial investment is a primary concern.

 

4. When determining net present value, this is commonly done to consider the risks associated with a

 

proposed investment:

 

A)

 

Decrease the discount rate used in the analysis

 

B)

 

Decrease the expected cash flows

 

C)

 

Increase the discount rate used in the analysis.

 

D)

 

Increase the required payback period

 

5.

 

The optimal transfer price from the corporation's viewpoint is:

 

A)

 

The seller’s variable cost plus the seller’s opportunity cost.

 

B)

 

The amount that equals segment margin

 

C)

 

The seller’s variable cost plus the buyer’s opportunity cost

 

D)

 

The highest it can possibly obtain

 

6.

 

For budgets to be successful, managers should do all of the following

 

except

 

:

 

A)

 

Encourage wide participation by all management levels

 

B)

 

Use budget performance reports to identify both good and poor performance

 

C)

 

Emphasize the importance of budgeting as a planning device to the employees

 

D)

 

Emphasize the importance of meeting the budget in order to receive performance raises.

 

7.

 

Which of the following is a suggested technique for managing the budgeting process in a manner that

 

increases employee motivation?

 

A)

 

Measure the budget against performance only when assessing poor performers

 

B)

 

Never alter the budget

 

C)

 

Top management should disassociate itself from the budget

 

D)

 

Emphasize the budget as a planning device.

 

8.

 

Which of the following is

 

not

 

included in work-in-process inventory?

 

A)

 

Direct materials costs

 

B)

 

Applied manufacturing overhead

 


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This question was answered on: May 23, 2022

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