If a finite-life alternative (for example, 5 years) is compared to one with an indefinite or very long life,capitalized costs can be used. To determine capitalized cost for the finite life alternative, calculate theequivalent A value for one life cycle and divide by the interest rate.Select one:a. Trueb. FalseThe annual worth method of comparing alternatives is often preferred to the present worth method,Select one:a. because AW for the first cycle is not the AW for the second.b. because the AW comparison is performed for only one life cycle.c. because AW is determined at MARR value.d. none of the answers.Last cash flow occurs in the same period as PSelect one:a. FalseO b. TrueStraight line depreciation applies when book value decreases linearly with time.Select one:a. Trueb. False

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Answered: If a finite-life alternative (for…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Illumination Corporation operates one central plant that has two divisions, the Flashlight Division and the Night Light Division. The following data apply to the coming budget year Budgeted costs of operating the plant for 2,000 to 3,000 hours: Fixed operating costs per year Variable operating costs Budgeted long-run usage per year Flashlight Division Night Light Division Practical capacity $500,000 OA. $500,000 B. $625.000 OC. $600,000 D. $650,000 $500 per hour 2,000 hours 1,000 hours 4,000 hours Assume that practical capacity is used to calculate the allocation rates Actual usage for the year by the Flashlight Division was 1,500 hours and by the Night Light Division was 800 hours If a dual-rate cost-allocation method is used, what amount of operating costs will be budgeted for the Night Light Division?
Consider a policy that has benefits and costs that accrue in the following way: Year 0: Benefits = 20; Costs = 40. Year 1: Benefits = 25; Costs = 35. Year 2: Benefits = 50; Costs = 10. If the social discount rate is 6%, the net present value of the policy is Answer. Please report your answer out to at least two digits (e.g., 4.44 or -0.26).
Will doubling the interest rate on an investment cut the time it takes to earn the same amount of interest in half? Could you provide an example?
Which alternative should be selected using incremental rate of return analysis, if MARR = 12.0%? First cost Annual benefit Life ROR Do-nothing 0 10 yrs A B $6,500 $3,500 1,246 765 с D $7,500 $5,000 1,523 779 14.0% 17.5% 15.5% 9.0% B, because its ROR is the highest something other than C, because C costs the most initially C because C has the highest annual benefit C, because the C-B increment has a ROR of 13.70% and the A-B increment has a ROR of 9.66%
Investment A has a future value of $600. Investment B has a future value of $500. Both have the same present value. All else equal, which one has the higher interest rate? Select one: a. B b. A c. A=B Clear my choice
You are considering two equally risky annuities, each of which pays $5,000 per year for 10 years. Investment ORD is an ordinary (or deferred) annuity, while Investment DUE is an annuity due. Which of the following statements is CORRECT? a. The present value of ORD exceeds the present value of DUE, and the future value of ORD also exceeds the future value of DUE. b. The present value of ORD must exceed the present value of DUE, but the future value of ORD may be less than the future value of DUE. c. The present value of DUE exceeds the present value of ORD, and the future value of DUE also exceeds the future value of ORD. d. The present value of DUE exceeds the present value of ORD, while the future value of DUE is less than the future value of ORD. e. If the going rate of interest decreases from 10% to 0%, the difference between the present value of ORD and the present value of DUE would remain constant.
Future value for an ordinary annuity and annuity due will be exactly the same if the investment horizon is exactly one year. Group of answer choices True False
Consider the following four alternatives. Three are do-something and one is Do -Nothing. Alternative A B D Cost $O $50 $30 $40 Net annual benefit Useful life (years) Which is the preferred alternative? If 10% interest rate is selected. Use PW analysis. $O $14 $5 $7 5 10 10
4. For the proposals accepted for further analysis in part (3), compute the net present value. Use a rate of 12% and the present value of $1 table above. Round to the nearest dollar.

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