Chapter 21 - Instructor Homework - Solutions

Chapter 21 - Instructor Homework - Solutions -...

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Chapter 21 Homework - SOLUTIONS        1
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11) 
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The net  present  value method calculates the expected monetary gain or loss from a project by discounting all expected future cash inflows  and outflows to the present point in time using the hurdle rate.   Answer:  
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TRUE  Diff: 2  Terms: 
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net present value  (NPV) method,  hurdle rate  Objective: 
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AACSB: 
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Reflective thinking 22) 
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The  accrual  accounting rate - of - return method has a significant weakness for use in making capital budgeting decisions because it does  not track cash flows and it ignores the time value of money.  Answer:  
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TRUE  Diff: 2  Terms: 
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discounted cash  flow (DCF)  methods, accrual  accounting rate of  return (AARR)  Objective: 
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AACSB: 
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Reflective thinking 33) 
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In  calculatin g the net initial investment cash flows, any increase in working capital required for the project should be included.   Answer:  
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TRUE  Diff: 2  Terms: 
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capital budgeting  Objective: 
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AACSB: 
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Analytical skills 34) 
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Cash  received from the disposal of old equipment is not relevant to a decision to buy a replacement.   Answer:  
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FALSE  Explanation:  
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Cash received from the  disposal of old  equipment is relevant to a  decision to buy a  replacement. 
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Diff: 2  Terms: 
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capital budgeting  Objective: 
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AACSB: 
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Ethical reasoning 49) 
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Which  capital  budgeting technique(s) measure all expected future cash inflows and outflows as if they occurred at a single point in time?  A) 
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net present  value   B) 
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internal rate of  return   C) 
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payback   D) 
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Both A and B  are correct.   Answer:  
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Diff: 2  Terms: 
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This note was uploaded on 11/19/2010 for the course ACCOUNTING Cost taught by Professor B during the Spring '10 term at Oakton.

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Chapter 21 - Instructor Homework - Solutions -...

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