Exam (elaborations)
Chapter 26 Capital Investment Analysis
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Chapter 26 Capital Investment Analysis Accounting 26th Ed by Warren -Test Bank
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CHAPTER 26: CAPITAL INVESTMENT ANALYSIS1. The process by which management plans, evaluates, and controls long-term investment decisions involving
fixed assets is called capital investment analysis.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.26-01 - 26-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.26 - Management Functions
ACCT.ACBSP.APC.38 - NPV/IRR Methods
ACCT.IMA.15 - Investment Decisions
BUSPROG: Analytic
2. Care must be taken involving capital investment decisions, since normally a long-term commitment of
funds is involved and operations could be affected for many years.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.26-01 - 26-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.26 - Management Functions
ACCT.ACBSP.APC.38 - NPV/IRR Methods
ACCT.IMA.15 - Investment Decisions
BUSPROG: Analytic
3. Only managers are encouraged to submit capital investment proposals because they know the processes and
are able to match investments with long-term goals.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.26-01 - 26-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.26 - Management Functions
ACCT.ACBSP.APC.38 - NPV/IRR Methods
ACCT.IMA.15 - Investment Decisions
BUSPROG: Analytic
© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
,Chapter 26: Capital Investment Analysis
4. Methods that ignore present value in capital investment analysis include the cash payback method.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.26-01 - 26-01
ACCT.WARD.16.26-02 - 26-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.37 - Payback/ARR Methods
ACCT.ACBSP.APC.38 - NPV/IRR Methods
ACCT.IMA.15 - Investment Decisions
BUSPROG: Analytic
5. Methods that ignore present value in capital investment analysis include the average rate of return method.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.26-01 - 26-01
ACCT.WARD.16.26-02 - 26-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.37 - Payback/ARR Methods
ACCT.ACBSP.APC.38 - NPV/IRR Methods
ACCT.IMA.15 - Investment Decisions
BUSPROG: Analytic
6. The cash payback method of capital investment analysis is one of the methods referred to as a present value
method.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.26-01 - 26-01
ACCT.WARD.16.26-02 - 26-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.37 - Payback/ARR Methods
ACCT.ACBSP.APC.38 - NPV/IRR Methods
ACCT.IMA.15 - Investment Decisions
BUSPROG: Analytic
© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
,Chapter 26: Capital Investment Analysis
7. The average rate of return method of capital investment analysis gives consideration to the present value of
future cash flows.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.26-01 - 26-01
ACCT.WARD.16.26-02 - 26-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.37 - Payback/ARR Methods
ACCT.ACBSP.APC.38 - NPV/IRR Methods
ACCT.IMA.15 - Investment Decisions
BUSPROG: Analytic
8. The methods of evaluating capital investment proposals can be grouped into two general categories that can
be referred to as (1) average rate of return and (2) cash payback methods.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.26-01 - 26-01
ACCT.WARD.16.26-02 - 26-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.26 - Management Functions
ACCT.ACBSP.APC.37 - Payback/ARR Methods
ACCT.IMA.15 - Investment Decisions
BUSPROG: Analytic
9. The methods of evaluating capital investment proposals can be grouped into two general categories that can
be referred to as (1) methods that ignore present value and (2) present values methods.
a. True
b. False
ANSWER: True
DIFFICULTY: Bloom’s:
Remembering Easy
LEARNING OBJECTIVES: ACCT.WARD.16.26-01 - 26-01
ACCT.WARD.16.26-02 - 26-02
ACCT.WARD.16.26-03 - 26-03
ACCREDITING STANDARDS: ACCT.ACBSP.APC.26 - Management Functions
ACCT.ACBSP.APC.38 - NPV/IRR Methods
ACCT.IMA.15 - Investment Decisions
BUSPROG: Analytic
© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
, Chapter 26: Capital Investment Analysis
10. Methods that ignore present value in capital investment analysis include the net present value method.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.26-01 - 26-01
ACCT.WARD.16.26-03 - 26-03
ACCREDITING STANDARDS: ACCT.ACBSP.APC.38 - NPV/IRR Methods
ACCT.IMA.15 - Investment Decisions
BUSPROG: Analytic
11. Methods that ignore present value in capital investment analysis include the internal rate of return method.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.26-01 - 26-01
ACCT.WARD.16.26-03 - 26-03
ACCREDITING STANDARDS: ACCT.ACBSP.APC.38 - NPV/IRR Methods
ACCT.IMA.15 - Investment Decisions
BUSPROG: Analytic
12. Average rate of return equals average investment divided by estimated average annual income.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.26-02 - 26-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.37 - Payback/ARR Methods
ACCT.IMA.15 - Investment Decisions
BUSPROG: Analytic
© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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