When analyzing a project, scenario analysis is best suited to accomplishing which one of the following? Multiple Choice Determining the minimal level of sales required to break even on an accounting basis Identifying the potential range of reasonable outcomes Estimating the residual value of fixed assets Determining how fixed costs affect NPV Determining the minimal level of sales required to break even on a financial basis

When analyzing a project, scenario analysis is best suited to accomplishing which one of the following? Multiple Choice Determining the minimal level of sales required to break even on an accounting basis Identifying the potential range of reasonable outcomes Estimating the residual value of fixed assets Determining how fixed costs affect NPV Determining the minimal level of sales required to break even on a financial basis

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 3MC: The third step for making a capital investment decision is to establish baseline criteria for...

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Capital investment evaluation methods can be grouped into which of the following two general categories? a. Methods that use average rate of return and methods that use differential analysis b. Methods that do not use variable costing and methods that use variable costing Oc. Methods that do not use present values and methods that use present values Od. Methods that use absorption costing analysis and methods that use incremental analysis
It is good to compute first the additional benefits that a project can give and the additional cost incurred by implementing a project. This concept talks about a. Law of Supply and Demand b. Marginal Cost Benefit Analysis c. Time Value of Money d. Financial Ratios
Sensitivity analysis determines the: Multiple Choice degree to which the net present value reacts to changes in a single variable. ideal ratio of variable costs to fixed costs for profit maximization. net present value range that can be realized from a proposed project. range of possible outcomes given that most variables are reliable only within a stated range. degree to which a project relies on its initial costs.
What is the MOST important variable of the financial planning process? Select one: a. The costs b. The capacity of the fixed asset c. The pro forma income statement d. The sales forecast
Critically analyse the benefits and limitations of the NPV and Accounting Rate of Return (ARR) investment appraisal methods
What are the problems in using the Internal Rate of Return method when making decisions on which project/s to undertake?
Which control is not a part of the fixed asset system?a. formal analysis of the purchase requestb. review of the assumptions used in the capital budgeting modelc. development of an economic order quantity modeld. estimates of anticipated cost savings
Calculating Net Present Value of a project is an application of which technique: a. SWOT Analysis.b. Future value.c. Cost Benefit Analysis. d. Discounting.e. Compounding.
Internal Rate of Return is used: a) To determine the interest rate at which benefits of a project are equivalent to its costs. b) To determine which investment to choose when one of two alternatives must be chosen. c) To determine the interest rate for an investment that yields no income. d) To choose an investment that necessary to preserve the operation of the business. e) To justify a “lost-leader” project of a strategic nature.
Why are NPV, BCR, and IRR considered SUPERIOR indicators of Project Feasibility compared to Payback or Recoupment Period and Accounting Rates of Return? Explain briefly.
Why do we need to predict how certain costs will behave in response to change activity in project cash-flow analysis?
Explain why the NPV is a more accurate measure than IRR when evaluating the financial profitability of a project.