Results For Item 2

1
1 / 1 point
Assume that there are two competing projects, A and B. Project A has an NPV of
P50,000 and an IRR of 15%. Project B has an NPV of P40,000 and an IRR of 20%.
Which of the following is true?
Correct answer:
a. Project A should be chosen because it has a higher NPV.
b. Project B should be chosen because it has a higher IRR.

, Not Selected
d. Neither of the two projects should be chosen.

, Not Selected
c. It is not possible to use NPV or IRR to choose between the two projects.
, Not Selected
Results for item 2.
2
1 / 1 point
Dover Company is considering an investment project which a working capital
investment of P30,000 would be required. The investment would provide cash
inflows of P10,000 per year for six years. If the company's cost of capital is 18%, and
if the working capital is released at the end of the project, the project's net present
value is:
a. P4,980
, Not Selected
d. P(12,360)
, Not Selected
Correct answer:
c. P16,080
b. P(4,980)
, Not Selected
Results for item 3.
3
1 / 1 point
The manager of Karyle is paid a bonus based on the company's current ROI of 20%.
Would the manager invest in a project that will pay a return on investment of 18
percent?
b. Yes, because the project's ROI is greater than the company's current ROI.
, Not Selected
Correct answer:
d. No, because the project's ROI is less than the company's current ROI.
c. Yes, because the project's ROI is equal to the company's current ROI.
, Not Selected
a. Yes, because the project's ROI exceeds the desired minimum rate of return.
, Not Selected
Results for item 4.
4
1 / 1 point
To avoid rejecting projects that actually should be accepted,
1. intangible benefits should be ignored.
2. conservative estimates of the intangible benefits value should be incorporated into
the NPV calculation.
3. calculate net present value ignoring intangible benefits and then, if the NPV is
negative, estimate whether the intangible benefits are worth at least the amount of the
negative NPV.
a. 1
, Not Selected
Correct answer:
d. both 2 and 3 are correct.
b. 2
, Not Selected
c. 3
, Not Selected
Results for item 5.
5
1 / 1 point
Helmet and Boots Company's master budget shows that the planned activity level for
next year is expected to be 20,000 machine hours. At this level of activity, the
following manufacturing overhead costs are expected:
Indirect labor P 45,000
Factory supplies 4,000
Indirect materials 21,000
Depreciation for factory building 15,000
Total manufacturing overhead P 85,000
If the company operates at 21,000 machine hours, how much is allowed on a flexible
budget for manufacturing overhead costs?
d. P85,000
, Not Selected
b. P73,500
, Not Selected
a. P89,250
, Not Selected
Correct answer:
c. P88,500
Results for item 6.
6
1 / 1 point
Assume that Steel Division has a product that can be sold either to outside customers
on an intermediate market or to Fabrication Division of the same company for use in
its production process. The different divisions are evaluated based on their divisional
profits.
Steel Division:
Capacity in units
200,000
No. of units being sold on the intermediate market
200,000
Selling price per unit on the intermediate market
P90
Variable cost per unit inclusive of variable selling expense of P3
70
Fixed cost per unit (based on capacity)
13
Fabrication Division:
No. of units needed for production
40,000
Purchase price per unit now being paid to as outside supplier
P86
The appropriate transfer price should be:

Correct answer:
b. P87
d. P86
, Not Selected
c. P70
, Not Selected
a. P90
, Not Selected
Results for item 7.
7
1 / 1 point
The Wave Division of Industrial Company produces a small valve that is use by
various companies as a component part in their products. Industrial Company
operates its divisions as autonomous units, giving its divisional manager great
discretion in pricing and other decisions. Each division is expected to generate a rate
of return of at least 14 percent on its operating assets. The Wave Division has average
operating assets of P700,000. The valve are sold for P5 each. Variable costs are P3
per valve, and fixed costs total P462,000 per year. The Division has a capacity of
300,000 units. How many valves must the Wave Division sell each year to generate
the desired rate of return on its assets?
b. 350,000
, Not Selected
Correct answer:
a. 280,000
d. 265,000
, Not Selected
c. 355,385
, Not Selected
Results for item 8.
8
1 / 1 point
Overtime conditions and pay were recently set by the personnel department. The
production department has just received a request for a rush order from the sales
department. The production department protests that additional overtime costs would
be incurred as a result of the order. The sales department argues the order is from an
important customer. The production department processes the order. In order to
control costs, which department should be charged with the overtime costs generated
as a result of the rush order?
b. production department

, Not Selected
d. shared by production department and sales department

, Not Selected
a. personnel department

, Not Selected
Correct answer:
c. sales department

Results for item 9.
9
0 / 1 point
Lakeview Company's product engineering department has developed a new product
that has a 3-year life cycle. Production of the product requires development of a new
process that requires a current P100,000 capital outlay. The P100,000 will be raised
by issuing P60,000 of bonds and by selling new stock for P40,000. The P60,000 in
bonds will have net (after-tax) interest payments of P3,000 at the end of the 3 years,
with the principal being repaid at the end of Year 3. The stock issue carries with it an
expectation of a 17.5% return, expressed in the form of dividends at the end of each
year (with P7,000 in dividends expected for each of the next 3 years). The sources of
capital for this investment represent the same proportion and costs that the company
typically has. Finally, the project will produce after-tax cash inflows of P50,000 per
year for the next 3 years. What is the company's cost of capital?
Incorrect answer:
c. 12%
Correct Answer:
b. 10%
d. 14%
, Not Selected
b. 10%
, Not Selected
a. 17.5%
, Not Selected
Results for item 10.
10
1 / 1 point
Matipid Division of Expenditures Company expects the following results for 2020:
Unit sales 70,000
Unit selling price P 10
Unit variable costs P 4
Total fixed costs P300,000
Total investment P500,000
The minimum required ROI is 15 percent, and the divisions are evaluated based on
the residual income. A foreign customer has approached Matipid's manager with an
offer to buy 10,000 units at P7 each. If Matipid accepts the order, it would not lose
any of the 70,000 units at the regular price. Accepting the order would increase fixed
costs by P10,000 and investment by P40,000. What is the minimum price that
Matipid could accept for the order and still maintain its expected residual income?
d. P9.00
, Not Selected
Correct answer:
c. P5.60
a. P5.00
, Not Selected
b. P4.75
, Not Selected
11
1 / 1 point
A company is considering putting up P50,000 in a thre-year project. The company's
expected rate of return is 12%. The present value of P1.00 at 12% for one year is
0.893, for two years is 0.797, and for three years is 0.712. The cash flows, net of
income taxes are P18,000 (present value of P16,074) for the first year and P22,000
(present value of P17,534) for the second year. Assuming that the rate of return is
exactly 12%, the cash flow, net of income taxes, for the third year would be
b. P 7,120
, Not Selected
c. P 10,000
, Not Selected
Correct answer:
a. P 23,022
d. P 16,392
, Not Selected
12
1 / 1 point
The manager of the generator division of Power Company expects the following
results in 2019 (pesos in million):
Sales P49.60
Variable cost (60%) 29.76
Contribution margin P19.84
Fixed costs 12.00
Profit P 7.84

Investment:
Plant equipment P19.51
Working capital 14.88 34.39
ROI 22.80%
The division has a target ROI of 30 percent. He states that the sales mix is relatively
constant so variable costs and equipment should be close to 60 percent of sales, fixed
cost and plant and equipment should remain constant, and working capital
(cash,receivables, and inventories) should vary closely with sales in the percentage
reflected above.

The peso sales that the division needs in order to reach the 30 percent ROI target is:

b. P44,373,871
, Not Selected
a. P19,829,032
, Not Selected
Correct answer:
c. P57,590,322
d. P59,510,000
, Not Selected
13
0 / 1 point
The current controllable margin for Kleir Division is P62,000. Its current operating
assets are P200,000. The division is considering purchasing equipment for P60,000
that will increase annual controllable margin by an estimated P10,000. If the
equipment is purchased, what will happen to the return on investment for the division?
b. A decrease of 13.3%.

, Not Selected
a. An increase of 16.1%.

, Not Selected
Incorrect answer:
d. A decrease of 7.2%.

Correct Answer:
c. A decrease of 3.3%.
c. A decrease of 3.3%.

, Not Selected
14
1 / 1 point
For P4,500,000, Shake Corporation purchased a new machine with an estimated
useful life of five year with no salvage value at its retirement. The machine is
expected to produce cash flow from operations, net of income taxes, as follows:
First year P 900,000
Second year 1,200,000
Third year 1,500,000
Fourth year 900,000
Fifth year 800,000
Shake will use the sum-of-the-year digit method to depreciate the new machine as
follows:
First year P1,500,000
Second year 1,200,000
Third year 900,000
Fourth year 600,000
Fifth year 300,000
What is the payback period for the machine?

a. 3 years
, Not Selected
c. 5 years
, Not Selected
d. 2 years
, Not Selected
Correct answer:
b. 4 years
15
1 / 1 point
European division's operating results include: controllable margin of P150,000, sales
totaling P1,200,000; and average operating assets of P500,000. The division is
considering a project with sales of P100,000, expenses of P86,000, and an investment
of average operating assets of P200,000. Its required rate of return is 9%. Should it
accept this project?
d. No, ROI will decrease to 7%.

, Not Selected
c. Yes, ROI still exceeds the cost of capital.

, Not Selected
a. Yes, ROI will drop by 6.6%, which is still above the required rate of return.
, Not Selected
Correct answer:
b. No, the return is less than the required rate of return of 9%.
16
0 / 1 point
Young Company manufactures and sells a singel product which has an economy and
luxury model. The following data are available:
Economy Luxury
Selling price P 40 P100
Variable costs 60% 40%
Fixed overhead is P1,500 of which one-third can be traced to the economy model,
one-third can be traced to the luxury model, and one third is common costs. Fixed
selling and administrative expense is P1,000 at which 20% can be traced to the
economy model, 30% can be traced to the luxury model and 50% is common cost. If
20 units of each are sold, what is the segment margin for the luxury model?
d. P800
, Not Selected
a. P0
, Not Selected
Incorrect answer:
c. P250
Correct Answer:
b. P400
b. P400
, Not Selected
17
1 / 1 point
Goget Electronics is facing stiff competition from imported goods. Its operating
income margin has been declining steadily for the past several years. The company
has been forced to lower prices so that it can maintain its market share. The operating
results for the past 3 years are as follows:
Year 1 Year 2
Year 3
Sales P10,000,000 P9,500,000
P9,000,000
Operating income 1,200,000 1,045,000
945,000
Average assets 15,000,000 15,000,000
15,000,000
For the coming year, Goget's president plans to install a JIT purchasing and
manufacturing system. She estimates that inventories will be reduced by 70% during
the first year of operations, producing a 20% reduction in the average assets of the
company, which would remain unchanged without the JIT system. She also estimates
that sales and operating income will be restored to Year 1 levels because of
simultaneous reductions in operating expenses and selling prices. Lower selling
prices will allow Goget to expand its market share. (Round all numbers to two
decimal places).

Suppose that the sales and net operating income for Year 4 remained the same as in
Year 3 but inventory reductions were achieved as projected, what is the company's
ROI?
d. 9.47%
, Not Selected
Correct answer:
c. 7.88%
b. 12.00%
, Not Selected
a. 8.00%
, Not Selected
18
1 / 1 point
The current income for a subunit is P36,000. Its current invested capital is P200,000.
The subunit is considering to purchase for P20,000 an equipment that will increase
annual income by an estimated P2,800. The firm's cost of capital is 10%. The firm
requires the different segments a minimum of 10% ROI. If the equipment is
purchased, the residual income of the subunit will increase by:
b. P16,000
, Not Selected
d. 4%
, Not Selected
Correct answer:
c. P 400
a. P2,800
, Not Selected
19
1 / 1 point
Statement 1. The interest yield of a project is a rate that will cause the present value
of the proposed capital expenditure to equal the present value of the expected annual
cash inflows.
Statement 2. Using the internal rate of return method, a project is rejected when the
rate is greater than or equal to the required rate of return.
Correct answer:
c. Only the first statement is correct.
d. Only the second statement is correct.

, Not Selected
a. Both statements are correct.

, Not Selected
b. Both statements are incorrect.

, Not Selected
20
1 / 1 point
Paper Products Company is considering a new product that will sell for P100 and has
a varible cost of P60. Expected volume is 20,000 units. New equipment costing
P1,500,000 and having a five-year useful life and no salvage value is needed, and will
be depreciated using the straight-line method. The machine has fixed cash operating
costs of P200,000 per year. The firm is in the 40 percent tax bracket and has cost of
12 percent. The present value of 1, end of five periods is 0.56743; present value of
annuity of 1 for 5 periods is 3.60478. How many units per year the firm must sell for
the investment to earn 12 percent internal rate of return?
c. 9,838
, Not Selected
d. 12,338
, Not Selected
Correct answer:
a. 17,338
b. 28,897
, Not Selected
21
1 / 1 point
Given below is a portion of a division's management performance report:

Budget Actual Difference
Contribution margin P1,040,000 P1,020,000 P20,000
Controllable fixed costs 430,000 420,000 10,000
Which statement is true about the manager's overall performance?
d. The manager's overall performance cannot be determined from the information
given.
, Not Selected
a. The manager's performance is above expectations.

, Not Selected
Correct answer:
b. The manager's performance is below expectations.
c. the manager was under budget on all controllable amounts.

, Not Selected
22
1 / 1 point
Mirror Inc. requires a return for Picture Division totaling 8%. Which projects would
add value to the company?

Average Controllable
Project Operating Assets Margin
A P500,000 P40,000
B P450,000 P30,000
C P375,000 P32,000
D P425,000 P40,000

Correct answer:
b. Projects A, C, and D
d. Projects A, B, and D

, Not Selected
a. A, B, C, and D
, Not Selected
c. projects C and D

, Not Selected
23
1 / 1 point
Kalinga Foundation, Inc., a non-profit organization, has one of its activities, the
production of cookies for its snack food store. Several years ago, Kalinga Foundation
Inc. purchased a special cookie-cutting machine. As of December 31, 2018, this
machine would have been used for three years. Management is considering the
purchase of a newer, more efficient machine. If purchased, the new machine would
be acquired on December 2018. Management expects to sell 300,000 dozen cookies
in each of the next six years. The selling price of the cookies is expected to average
P1.15 per dozen. Kalinga Foundation, Inc. has two options: continue to operate the
old machine, or sell the old machine and purchase the new machine. The following
information has been assembled to help management decide which option is more
desirable.
Old
New
Machine
Machine
Original cost of machine at acquisition P80,000
P120,000
Remaining useful life as of 12/31/18 6 years
6 years
Expected annual cash operating expenses:
Variable cost per dozen P0.38
P0.29
Total fixed costs P21,000
P11,000
Estimated cash value of machines:
December 31, 2018 P40,000
P120,000
December 31, 2024 P7,000
P20,000
Assume all operating revenues and expenses occur at the end of the year. The net
advantage in present value, using a 16% rate, of the better alternative is:

c. Retain Old Machine, P16,345.

, Not Selected
a. Retain Old Machine, P61,675.

, Not Selected
Correct answer:
b. Buy New Machine, P61,675.
d. Buy New Machine, P16,345.

, Not Selected
24
0 / 1 point
Juliana Cardenas, owner of the Baker Company, was approached by a total local
dealer of air-conditioning units. The dealer proposed replacing Baker's old cooling
system with a modern, more efficient system. The cost of the new system was quoted
at P339,000, but it would save P60,000 per year in energy costs. The estimated life of
the new machine system is 10 years, with no salvage value expected. Excited over the
possibility of saving P60,000 per year and having a more reliable unit, Juliana
requested an analysis of the project's economic viability. All capital projects are
required to earn at least the firm's cost of capital, which is 8%. There are no income
taxes. Suppose that energy savings are less than claimed. What is the minimum
annual cash savings that must be realized for the project to earn a rate equal to the
firm's cost of capital?
b. P 58, 576

, Not Selected
c. P50,521
, Not Selected
Incorrect answer:
a. P 59,857
Correct Answer:
c. P50,521
d. P53,428
, Not Selected
25
1 / 1 point
A hospital is considering the possibility of two new purchases : new X-ray equipment
and new biopsy equipment. Each project would require an investment of P750,000.
The expected life for each is 5 years with no expected salvage value. The net cash
inflows associated with the two independent projects are as follows:
Year X-ray Equipment Biopsy Equipment
1 P375,000 P 75,000
2 150,000 75,000
3 300,000 525,000
4 150,000 600,000
5 75,000 675,000
What is the net present value of each project assuming a required rate of return of
12%?
c. X-ray: P54,312 Biopsy: P512,389

, Not Selected
Correct answer:
b. X-ray: P55,821 Biopsy: P514,766
a. X-ray: P56,378 Biopsy: P499,818

, Not Selected
d. X-ray: P53,219 Biopsy: P512,775

, Not Selected
26
1 / 1 point
Hightech Inc. has two divisions: Auxiliary Components and Audio Systems.
Divisional managers are encouraged to maximize ROI and EVA. Managers are
essentially free to determine whether goods will be transferred internally and what the
internal transfer prices will be. Headquarters has directed that all internal prices be
expressed on a full cost-plus basis. The markup in the full cost pricing arrangement,
however, is left to the discretion of the divisional managers. Recently, the two
divisional managers met to discuss a pricing agreement for a subwoofer that would be
sold with a personal computer system. Production of the subwoofers is at capacity.
Subwoofers can be sold for P1,550 to outside customers. The Audio Systems
Division can also buy the subwoofers from external sources for the same price;
however, the manager of this division is hoping to obtain a price concession by
buying internally. The full cost of manufacturing the subwoofer is P1000. If the
manager of the Auxiliary Components Division sells the subwoofer internally, P250
of the selling and distribution costs can be avoided. The volume of business would be
250,000 units per year, which is well within the capacity of the producing division.

After some discussion, the two managers agreed on a full-cost plus pricing scheme
that would be reviewed annually. Any increase in the outside selling price would be
added to the transfer price by simply increasing the markup by an appropriate
amount. Any major changes in the factors that led to the agreement could initiate a
new round of negotiation. Otherwise, the full cost-plus arrangement would continue
in force for subsequent years. What are the minimum and maximum transfer prices?
b. Minimum: P1,450; Maximum: P1,550

, Not Selected
Correct answer:
d. Minimum: P1,300; Maximum : P1,550
c. Minimum: P1,475; Maximum: P1,500

, Not Selected
a. Minimum:P1,425; Maximum: P1,500
, Not Selected
27
0 / 1 point
Lesly Dagon, division manager of Audiotech Inc. was debating the merits of a new
product - a weather radio that would put out a warning if the country in which the
listener lived were under a severe thunderstorm or tornado alert. The budgeted
income of the division was P725,000 with operating assets of P3,625,000. The
proposed investment would add income of P640,000 and would require an additional
investment in equipment of P4,000,000. The minimum required return on investment
for the company is 12%. Round all numbers to two decimal places. What is the ROI
of the division if the radio project is undertaken?
a. 20%
, Not Selected
c. 18%
, Not Selected
Incorrect answer:
d. 17%
Correct Answer:
c. 18%
b. 16%
, Not Selected
28
1 / 1 point
Segment A generated sales revenues of P400,000 and variable operating expenses of
P180,000. Its controllable fixed expenses were P40,000. It was assigned 20% of
P200,000 of fixed costs controlled by others. The common fixed costs were P25,000.
What was Segment A's controllable segment profit margin?
Correct answer:
b. P180,000
c. P140,000
, Not Selected
d. P160,000
, Not Selected
a. P220,000
, Not Selected
29
1 / 1 point
The manager of a division that produces add-on products for the automobile industry
has just been presented the opportunity to invest in two independent projects. The
first is in air conditioner for the back seats of vans and minivans. The second is a
turbocharger. Without the investments, the division will have average assets for the
coming year of P28.9M and expected operating income of P4.335M. The outlay
required for each investment and the expected operating income are as follows:
Air Conditioner
Turbocharger
Outlay P750,000 P540,000
Operating income 90,000 82,080
Note: Round all numbers to two decimal places. Compute the budgeted divisional
ROI if both investments are made.
Correct answer:
c. 14.93%
b. 15.00%
, Not Selected
a. 13.91%
, Not Selected
d. 14.13%
, Not Selected
30
0 / 1 point
The rankings of mutually exclusive investments determined using the internal rate of
return (IRR) method and the net present value (NPV) method may be different when:
d. multiple projects have unequal lives and the size of the investment for each project
is different.
, Not Selected
b. the required rate of return equals the IRR of each project.
, Not Selected
Incorrect answer:
a. the lives of the multiple projects are equal and the size of the required investments
are equal.
Correct Answer:
c. the required rate of return is higher than the IRR of each project.
c. the required rate of return is higher than the IRR of each project.
, Not Selected
31
0 / 1 point
An appropriate transfer price between two divisions of the Ring Corporation can be
determined from the following data:
Fabrication Division
Market price of subassembly P50
Variable cost of subassembly P20
Excess capacity (in Units) 1,000
Assembly Division
Number of units needed 900
What is the natural bargaining range for the two divisions?

a. between P20 and P50

, Not Selected
Incorrect answer:
d. P50 is the only acceptable price

Correct Answer:
a. between P20 and P50
c. between P50 and P70

, Not Selected
b. any amount less than P50
, Not Selected
32
0 / 1 point
ABS Products Inc. is considering to invest in one of two projects. Both projects have
a net present value of P25,000; however Project Aplha requires an initial investment
of P700,000 while Project Delta requires an initial investment of P300,000. Based on
this information, which of the following statements is true?
c. Both projects will have the same profitability index.

, Not Selected
Incorrect answer:
b. Project Alpha will have a higher profitability index.

Correct Answer:
a. Project Delta will have a higher profitability index.
a. Project Delta will have a higher profitability index.

, Not Selected
d. There is not enough information to determine the profitability index of either
project.
, Not Selected
33
1 / 1 point
Vendo Company is planning to buy a coin-operated machine costing P400,000. For
book and tax purposes, this machine will be depreciated P80,000 each year for five
years. Vendo estimates that this machine will yield an annual inflow, net of
depreciation and income taxes, of P120,000. Vendo's desired rate of return on its
investments is 12%. At the following discount rates, the NPVs of the investment in
this machine is:

Discount rate NPV
12% +P3,258
14% +P1,197
16% - P 708
18% - P2,474
Vendo's expected IRR on its investment in this machine is:
b. 12.00%
, Not Selected
Correct answer:
d. 15.30%
a. 3.25%
, Not Selected
c. 16.00%
, Not Selected
34
1 / 1 point
Jonathan Cable, process engineer, knows that the acceptance of a new process design
will depend on its economic feasibility. The new process is designed to improve
environmental performance. On the negative side, the process design requires new
equipment and an infusion of working capital. The equipment will cost P1,200,000,
and its operating expenses will total P270,000 per year. The equipment will last for 7
years but will need a major overhaul costing P120,000 at the end of the fifth year. At
the end of year 7, the equipment will be sold for P96,000. An increase in working
capital totaling P120,000 will also be needed at the beginning. This will be recovered
at the end of 7 years.

On the positive side, Jonathan estimates that the new process will save P400,000 per
year in environmental costs (fines and cleanup avoided). The cost of capital is
12%.Should the new process design be accepted?
d. Yes, because it will yield a positive NPV of P697,095.

, Not Selected
c. No, because it will result to a negative NPV of P(607,095).

, Not Selected
Correct answer:
b. No, because it will result to a negative NPV of P(697,095).
a. Yes, because it will yield a positive NPV of P695,097.

, Not Selected
35
1 / 1 point
Mirriam Company is considering replacing its old machine with a new and more
efficient one. The old machine has book value of P100,000, a remaining useful life of
4 years, and annual straight-line depreciation of P25,000. The existing machine has a
current market value of P80,000. The replacement machine would cost P160,000,
have a 4-year life, and will save P50,000 per year in cash operating costs. If the
replacement machine would be depreciated using the straight-line method and the tax
rate is 40%, what should be the increase in annual income taxes?
b. P 28,000
, Not Selected
c. P 40,000
, Not Selected
d. P 4,000
, Not Selected
Correct answer:
a. P 14,000
36
1 / 1 point
Statement 1. The cash payback is frequently used as a screening tool but it does not
take into consideration the profitability of a project.
Statement 2. By ignoring intangible benefits, capital budgeting techniques might
incorrectly eliminate projects that could be financially beneficial to the company.
c. Only the first statement is correct.

, Not Selected
Correct answer:
a. Both statements are correct.
b. Both statements are incorrect.

, Not Selected
d. Only the second statement is correct.

, Not Selected
37
1 / 1 point
A company has minimum required rate of return of 10% and is considering investing
in a project that requires an investment of P70,000 and is expected to generate cash
inflows of P30,000 at the end of each year for 3 years. The present value of future
cash inflows for this project is
Correct answer:
b. P74,610
a. P70,000
, Not Selected
d. P4,610
, Not Selected
c. P82,070
, Not Selected
38
0 / 1 point
Purple's Pharmaceutical Delivery Company is a high-volume business that features
home delivery services to elderly shut-ins. Located in Makati City, the company
currently uses six delivery trucks to service the area within a 100-mile radius of the
metropolis and suburbs. Each delivery truck can make a maximum of 600 deliveries
per month. In June, the demand for these deliveries totaled 3,200, and the company
has been experiencing a 2 percent increase in demand, compounded monthly. In
which month must the company add a seventh delivery truck, given these estimates?
b. December
, Not Selected
c. October
, Not Selected
Incorrect answer:
d. February of next year

Correct Answer:
b. December
a. August
, Not Selected
39
0 / 1 point
Dr. Wincelet Abad, a plastic surgeon, had just returned from a conference in which
she learned of a new surgical procedure for removing wrinkles around eyes, reducing
the time to perform the normal procedure by 50%. Given her patient-load pressures,
Dr. Abad is excited to try out the new technique. By decreasing the time spent on eye
treatments or procedures, she can increase her total revenues by performing more
services within a work period. In order to implement the new procedure, special
equipment costing P74,000 is needed. The equipment has an expected life of 4 years,
with a salvage value of P6,000. Dr. Abad estimates that her cash revenues will
increase by the following amounts:
Year Revenue Increases
1 P19,800
2 27,000
3 32,400
4 32,400
She also expects additional cash expenses amounting to P3,000 per year. The cost of
capital is 12%. Ignore income taxes. Before finalizing her decision, Dr. Abad
decided to call two plastic surgeons who have been using the new procedure for the
past 6 months. The conversations revealed a somewhat less glowing report than she
received at the conference. The new procedure reduced the time required by about
25% rather than the advertised 50%. Dr. Abad estimated that the net operating cash
flows of the procedure would be cut by one-third because of the extra time and cost
involved (salvage value would be unaffected). Using this information, what is NPV
of the project?
a. P 22,413
, Not Selected
d. P(21,025)
, Not Selected
c. P23,417
, Not Selected
Incorrect answer:
b. P(21,087)
Correct Answer:
d. P(21,025)
40
1 / 1 point
The segment manager of the Kings Restaurant is considering two possible expansion
alternatives. The required investments, expected controllable margins, and the ROIs
of each are as follows:

Controllable
Projects Investment Margin ROI
A P120,000 P30,000 25%
B P540,000 P50,000 9.25%

The segment has currently P2,000,000 in invested capital and a controllable margin of
P250,000. Which one of the following projects will increase the segment's ROI?
d. Neither the A nor the B option.

, Not Selected
c. Only the B option.

, Not Selected
a. Both the A and B options.

, Not Selected
Correct answer:
b. Only the A option.

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1

a. Project A should be chosen because it has a higher NPV.

b. Project B should be chosen because it has a higher IRR.

d. Neither of the two projects should be chosen.

d. both 2 and 3 are correct.

b. production department

d. shared by production department and sales department

a. personnel department

c. sales department

b. A decrease of 13.3%.

a. An increase of 16.1%.

d. A decrease of 7.2%.

c. A decrease of 3.3%.

d. No, ROI will decrease to 7%.

c. Yes, ROI still exceeds the cost of capital.

c. Only the first statement is correct.

d. Only the second statement is correct.

a. Both statements are correct.

b. Both statements are incorrect.

a. The manager's performance is above expectations.

b. The manager's performance is below expectations.

c. the manager was under budget on all controllable amounts.

b. Projects A, C, and D

d. Projects A, B, and D

c. projects C and D

c. Retain Old Machine, P16,345.

a. Retain Old Machine, P61,675.

b. Buy New Machine, P61,675.

d. Buy New Machine, P16,345.

b. P 58, 576

c. X-ray: P54,312 Biopsy: P512,389

a. X-ray: P56,378 Biopsy: P499,818

d. X-ray: P53,219 Biopsy: P512,775

b. Minimum: P1,450; Maximum: P1,550

d. Minimum: P1,300; Maximum : P1,550

c. Minimum: P1,475; Maximum: P1,500

a. between P20 and P50

d. P50 is the only acceptable price

c. between P50 and P70

c. Both projects will have the same profitability index.

b. Project Alpha will have a higher profitability index.

a. Project Delta will have a higher profitability index.

d. Yes, because it will yield a positive NPV of P697,095.

c. No, because it will result to a negative NPV of P(607,095).

b. No, because it will result to a negative NPV of P(697,095).

a. Yes, because it will yield a positive NPV of P695,097.

c. Only the first statement is correct.

a. Both statements are correct.

b. Both statements are incorrect.

d. Only the second statement is correct.

d. February of next year

d. Neither the A nor the B option.

c. Only the B option.

a. Both the A and B options.

b. Only the A option.

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