Exam 3 Practice

Exam 3 Practice - Practice Exam 3 and Appendix B These...

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Practice Exam 3 (Chapters 24, 25 and Appendix B) These practice questions do not cover every topic that may appear on the actual exam, but they should be a part of your exam preparation. You should also study your class notes, homework, practice problems as well as the assigned reading from the textbook. 01. Capital budgeting decisions usually involve analysis of: A. Cash outflows only. B. Short-term investments only. C. Long-term investments only. D. Investments with certain outcomes only. E. Operating revenues. 02. For a capital budgeting decision, how many of the following would be included in cash inflows? Sale of old asset Initial investment Repairs and maintenance Cash from customers Operating costs A. 0 B. 1 C. 2 D. 3 E. 4 03. Which of the following is not a capital budgeting technique? A. Payback period B. Net present value C. Accounting rate of return D. Internal rate of return E. Required rate of return 04. Transmogrifier Transportation, Inc. purchased a new vehicle by obtaining a loan. The company agreed to the following terms: Annual Payment 8,000 Rate 6% Term of loan (in years) 5 What is the total amount of interest that the company will pay on the loan? Answer 05. If you are able to earn a 10% rate of return, what amount would you need to invest to have \$500 two years from now? A. 1,050 B. 868 C. 413 D. 455 E. 605 -- Page 1 of 5 --

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06. The Stewart Company sells coffee cups for \$10 per unit. Based on a 10,000-unit production level, the variable costs are \$6 per unit and the fixed costs are \$3 per unit. If the company produced and sold 12,500 units, what is its budgeted net income? Answer 07. A project has the following projected cash flows: year 1 \$1000, year 2 \$3,000, year 3 \$2,000, year 4 \$1,500 and year 5 \$800. If the project required an investment of \$6,500 what is the payback period? A.
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This note was uploaded on 02/16/2010 for the course ECONOMICS 420K taught by Professor Dusansky during the Spring '10 term at University of Texas.

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Exam 3 Practice - Practice Exam 3 and Appendix B These...

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