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Unformatted text preview: is expected to be zero. Upper Darby Park is assuming no tax consequences. Upper Darby Park has a 10% required rate of return. What is the payback period on this investment? A) 3 years B) 3.6 years C) 4.2 years D) 5 years Answer: B Explanation: D) \$ Diff: 2 T 4 AACSB: Analytical skills 88) Crystal Manufact uring Company provides glassware machines for major department store retailers. The company has been investigating a new piece of machinery for its production department. The old equipment has a remaining life of five years and the new equipment has a value of \$115,500 with a five-year life. The expected additional cash inflows are \$35,000 per year. What is the payback period on this investment? A) 2.5 years B) 3 years C) 3.3 years D) 5 years Answer: C Explanation: B) payback Objective: 4 AACSB: Analytical skills 89) Springtim e Flower Company provides flowers and other nursery products for decorative purposes in medium to large sized restaurants and businesses. The company has been investigating the purchase of a new specially equipped van for deliveries. The van has a value of \$61,875 with a seven-year life. The expected additional cash inflows are \$13,750 per year. What is the payback period on this investment? A) 3 years B) 4.5 years C) 6 years D) NA - project not feasible Answer: B Explanation: B) \$ Diff: 2 T 4 AACSB: Analytical skills 90) The to capital budgeting which divides an accounting measure of income by an accounting measure of investment is the: approach A) net present B) value internal rate of return C) payback method D) accrual accounting rate of return Answer: D Diff: 1 Terms: accrual accounting rate of return (AARR) Objective: 5 AACSB: Reflective thinking 91) For capital budgeting decisions, the use of the accrual accounting rate of return for evaluating performance is often a stumbling block to the implementation of the: A) net cash flow B) most effective goal-congruence choice C) discounted cash flow method for capital budgeting D) most effective tax strategy Answer: D Diff: 2 Terms: accrual accounting rate of return (AARR) Objective: 5 AACSB: Reflective thinking 92) The most t manager evaluation and goal congruence issues arise because of inconsistencies between the following methods of significan choosing among alternatives for capital budgeting purposes: A) net present B) value method and the internal rate of return method payback method and the net present value method C) net pres...
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