Managerial Accounting (5th Edition)
5th Edition
ISBN: 9780134128528
Author: Karen W. Braun, Wendy M. Tietz
Publisher: PEARSON
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Question
Chapter 12, Problem 12.14SE
To determine
The missing figures in the statement with appropriate capital budgeting method.
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Students have asked these similar questions
In proper capital budgeting analysis we evaluate incremental __________ cash flows.
Select one:
a.
accounting
b.
operating
c.
before-tax
d.
financing
Defining capital investments and the capital budgeting process
Match each definition with its capital budgeting method.
Methods
Accounting rate of return
Internal rate of return
Net present value
Payback
Definitions
It is only concerned with the time it takes to get cash outflows returned.
It considers operating income but not the time value of money in its analyses.
Compares the present value of cash outflows to the present value of cash inflows to determine investment worthiness.
The true rate of return an investment earns.
1. Concepts used in cash flow estimation and risk analysis
You can come across different situations in your life where the concepts from capital budgeting will help you in evaluating the situation and making calculated decisions. Consider the following situation:
The following table contains five definitions or concepts. Identify the term that best corresponds to the concept or definition given.
Concept or Definition
Term
The specific cash flows that should be considered in a capital budgeting decision
A cost that has been incurred and may be related to a project but should not be part of the decision to accept or reject a project
The cash flows that the asset or project is expected to generate over its life
The effects on other parts of the firm
The cost of not choosing another mutually exclusive project by accepting a particular project
A successful sushi chain in Hong Kong spent $500,000 to conduct a study on whether to open…
Chapter 12 Solutions
Managerial Accounting (5th Edition)
Ch. 12 - Prob. 1QCCh. 12 - (Learning Objective 2) After identifying potential...Ch. 12 - Prob. 3QCCh. 12 - Prob. 4QCCh. 12 - Prob. 5QCCh. 12 - Prob. 6QCCh. 12 - Prob. 7QCCh. 12 - Prob. 8QCCh. 12 - Prob. 9QCCh. 12 - (Learning Objective 5) Which of the following...
Ch. 12 - Order the capital budgeting process (Learning...Ch. 12 - Prob. 12.2SECh. 12 - Prob. 12.3SECh. 12 - Prob. 12.4SECh. 12 - Prob. 12.5SECh. 12 - Prob. 12.6SECh. 12 - Prob. 12.7SECh. 12 - Prob. 12.8SECh. 12 - Prob. 12.9SECh. 12 - Prob. 12.10SECh. 12 - Prob. 12.11SECh. 12 - Prob. 12.12SECh. 12 - Prob. 12.13SECh. 12 - Prob. 12.14SECh. 12 - Prob. 12.15SECh. 12 - Identify ethical standards violated (Learning...Ch. 12 - Prob. 12.17AECh. 12 - Compute payback period and analyze changes...Ch. 12 - Prob. 12.19AECh. 12 - Prob. 12.20AECh. 12 - Prob. 12.21AECh. 12 - Prob. 12.22AECh. 12 - Calculate the payback and NPV for a sustainable...Ch. 12 - Prob. 12.24AECh. 12 - Prob. 12.25AECh. 12 - Prob. 12.26AECh. 12 - Prob. 12.27AECh. 12 - Prob. 12.28AECh. 12 - Prob. 12.29AECh. 12 - Prob. 12.30AECh. 12 - Prob. 12.31AECh. 12 - Prob. 12.32AECh. 12 - Prob. 12.33AECh. 12 - Prob. 12.34AECh. 12 - Prob. 12.35AECh. 12 - Prob. 12.36BECh. 12 - Prob. 12.37BECh. 12 - Prob. 12.38BECh. 12 - Prob. 12.39BECh. 12 - Prob. 12.40BECh. 12 - Prob. 12.41BECh. 12 - Prob. 12.42BECh. 12 - Prob. 12.43BECh. 12 - Prob. 12.44BECh. 12 - Prob. 12.45BECh. 12 - Prob. 12.46BECh. 12 - Prob. 12.47BECh. 12 - Prob. 12.48BECh. 12 - Prob. 12.49BECh. 12 - Prob. 12.50BECh. 12 - Prob. 12.51BECh. 12 - Prob. 12.52BECh. 12 - Prob. 12.53BECh. 12 - Prob. 12.54BECh. 12 - Prob. 12.55APCh. 12 - Prob. 12.56APCh. 12 - Prob. 12.57APCh. 12 - Prob. 12.58APCh. 12 - Prob. 12.59BPCh. 12 - Prob. 12.60BPCh. 12 - Evaluate an investment using all four methods...Ch. 12 - Prob. 12.62BPCh. 12 - Prob. 12.63SCCh. 12 - Discussion Questions 1. Describe the capital...Ch. 12 - Prob. 12.65ACTCh. 12 - Prob. 12.66ACTCh. 12 - Prob. 12.67ACT
Knowledge Booster
Similar questions
- Objective: This case deals with the capital budgeting techniques of Net Present Value (i.e. NPV) and Internal Rate of Return (i.e. IRR), Payback Period and Profitability Index. In this case, students will compare seven projects considering the are dependent projects using NPV and IRR, Pay back Period and Pl and choose the best project. They will learn about NPV and IRR methods and their advantages and disadvantages. Students will also learn the weakness of the IRR method when comparing two or more projects. Finally, they will evaluate these projects assuming that the projects are independent projects rather than mutually exclusive ones. This is a hands-on experience for students who want to delve into project valuation. Projects Year Project A Project Project Project Project Project Project D B E F G -2000 -1500 -2000 -2500 -2000 -8000 -3000 1 200 100 1000 1000 150 200 300 2 350 200 800 1000 160 400 600 3 500 100 600 1000 190 600 900 4 650 200 200 1000 200 800 1200 5 800 400 200 1000…arrow_forwardAs a financial manager and evaluating capital investments, one of the most difficult portions of the analysis is to predict the future cash flows. Please pick a capital investment of your choice and describe how you would develop the Free Cash Flows. Pay particular attention to describing if working capital should be included and incremental revenue/income.arrow_forwardWhy does capital budgeting rely on an analysis of cash flows rather than on net income? Base your answer on the accounting principles of recognizing and reporting revenue and expenses.Describe two capital budgeting decisions based on the time value of money. Which of the two methods would you select for a capital budgeting project and why?arrow_forward
- 1. Set capital spending 2. Determine potential projects 3. Forecast cash flows 4. Identify cost of capital ang risk 5. Select and implement project. Discuss which the capital budgeting process listed above you think would be the most challenging. Give reasons for yout answers.arrow_forward1. Of all the methods for evaluating the data (techniques of capital budgeting), which one do you think you would be most likely to use in the future and why? 2. How does depreciation factor into capital investment decisions?arrow_forwardAn appropriate capital budgeting process requires that the following steps be taken in which order? a) Collection of data b) Reevaluation and adjustment c) Evaluation and decision making d) Search for and discovery of investment opportunities Multiple Choice d, b, a, c d, a, b, c b, d, a, c d, a, c, barrow_forward
- Which of the following best describes the process of capital budgeting? a Forecasting revenues and expenses hmiting funds for capital improvements without considering the profitability of proposed prot determining a companys short term goals d. determinung the amount to spend on fixed assets and which fixed assets to purchasearrow_forwardSelect all of the following that managers can use to evaluate capital invesments. (Select all that apply.) High-Low Method Net present value method LIFO Method Internal rate of return method FIFO Method Annual rate of return Cash payback technique Depreciation methodarrow_forwardThe duration of time within which the investment made for the project will be recovered by the net returns of the project is known as а. Accounting rate of return method b. Payback period С. Net present value method d. Period of return Capital budgeting is the process of evaluating and selecting short-term investments that are consistent with the firm's goal of maximizing owners' wealth. Select one: True Falsearrow_forward
- What is the second step of capital budgeting? a. Gathering the money for the investment b. Identifying potential projects c. Getting the accountant involved d. All of the abovearrow_forwardWorking capital management includes which one of the following? OA. Deciding which new projects to accept B. Deciding whether to purchase a new machine or fix a currently owned machine OC. Determining which customers will be granted credit OD. Determining how many new shares of stock should be issued OE. Establishing the target debt-equity ratioarrow_forwardDefine the most important capital budgeting techniques. Name at least two capital budgeting techniques (e.g., NPV, IRR, Payback Period, etc.) that you used to arrive investment decisions.arrow_forward
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