Chap014 - Chapter 14 Strategic Issues in Making Long-Term...

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Chapter 14 - Strategic Issues in Making Long-Term Capital Investment Decisions Chapter 14 Strategic Issues in Making Long-Term Capital Investment Decisions True / False Questions 1. Strategic planning is the decisions that management makes on a daily basis. FALSE AACSB: Analytic AICPA BB: Critical Thinking, Resource Management AICPA FN: Decision Making Difficulty: Easy Learning Objective: 1 2. Capital investment decisions should be not made within the context of an organization's strategic plans. FALSE AACSB: Analytic AICPA BB: Critical Thinking, Resource Management AICPA FN: Decision Making Difficulty: Easy Learning Objective: 1 3. Organizations make three general types of long-term capital investments: 1) Replacements and minor improvements, 2) Expansion, and 3) Strategic moves. TRUE AACSB: Analytic AICPA BB: Critical Thinking, Resource Management Difficulty: Easy Learning Objective: 1 14-1
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Chapter 14 - Strategic Issues in Making Long-Term Capital Investment Decisions 4. Using time horizons that are too short is a potential difficulty in the justification of investments in high-tech projects. FALSE AACSB: Analytic AICPA BB: Critical Thinking, Resource Management AICPA FN: Decision Making Difficulty: Easy Learning Objective: 2 5. If past financial records are used to help determine the financial analysis for a project, the financial records should never be adjusted for inflation. FALSE AACSB: Analytic AICPA BB: Critical Thinking Difficulty: Easy Learning Objective: 3 6. The primary purpose of a due diligence investigation is to determine what long-term capital investments that a company should make. FALSE AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Decision Making Difficulty: Easy Learning Objective: 1 7. Using a discount rate that is too low is a potential difficulty in the justification of investments in high-tech projects. FALSE AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Decision Making Difficulty: Medium Learning Objective: 3 14-2
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Chapter 14 - Strategic Issues in Making Long-Term Capital Investment Decisions 8. When making a decision for a strategic move, past financial records would tend to be very useful. FALSE AACSB: Analytic AICPA BB: Critical Thinking, Resource Management AICPA FN: Decision Making Difficulty: Medium Learning Objective: 2 9. Sensitivity analysis is the study of how the outcome of a decision-making process changes as one or more of the assumptions change. TRUE AACSB: Analytic AICPA BB: Critical Thinking, Resource Management AICPA FN: Decision Making Difficulty: Easy Learning Objective: 1 10. Sensitivity analysis is performed after the long-term investment decision has been made. FALSE AACSB: Analytic AICPA BB: Critical Thinking, Resource Management AICPA FN: Decision Making Difficulty: Medium Learning Objective: 1 11. Corporate managers can ignore the need to make environmentally friendly investment decisions.
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